SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

FORM 10-K

≤ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURI-TIES EXCHANGE ACT OF 1934 ®NO FEE REQUIRED©

For the Ñscal year: July 31, 2000

n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934 ®NO FEE REQUIRED©

For the transition period from to .

Commission Ñle number 0-6715

ANALOGIC CORPORATION(Exact name of registrant as speciÑed in its charter)

Massachusetts 04-2454372(State or other jurisdiction of (I.R.S. Employer IdentiÑcation No.)Incorporation or organization)

8 Centennial Drive, Peabody, Massachusetts 01960(Address of principal executive oÇces) (Zip Code)

(978) 977-3000(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.05 par value(Title of Class)

Indicate by check mark whether the Registrant (1) has Ñled all reports required to be Ñled by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the Registrant was required to Ñle such reports), and (2) has been subject to such Ñling requirements forthe past 90 days. Yes ≤ No

Indicate by check mark if disclosure of delinquent Ñlers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of Registrant's knowledge, in deÑnitive proxy orinformation statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. ≤

The aggregate market value of the Registrant's Common Stock held by non-aÇliates of the Registrant atAugust 31, 2000 was approximately $300,986,000.

Number of shares of Common Stock outstanding at August 31, 2000: 12,878,692

Documents Incorporated by Reference: None

PART I

Item 1. Business

(a) Developments During Fiscal 2000

Total revenues of Analogic Corporation (hereinafter, together with its subsidiaries, referred to as""Analogic'' or the ""Company'') for the Ñscal year ended July 31, 2000, were $297,619,000 as compared to$279,694,000 for Ñscal 1999, an increase of 6%. Net income for Ñscal 2000 was $14,108,000, or $1.10 perdiluted share as compared to $19,513,000, or $1.53 per diluted share for Ñscal 1999.

The Company entered into a strategic alliance with Eastman Kodak Corporation (Rochester, NY) todeÑne, develop and manufacture state-of-the-art digital radiography (DR) systems. Kodak plans to enter thedigital radiography market with three systems to be supplied by Analogic. These systems employ a reusableÖat panel detector consisting of an amorphous selenium semiconductor X-ray absorber coating over a thin-Ñlmtransistor array as a basis for X-ray capture and direct digitization. Digital radiography is designed to providehigh quality digital images that optimize radiology workÖow through improved patient scheduling andaccelerated access to images.

The Company outlined a Ñve-year strategic plan to accelerate growth and enhance shareholder valuebased upon three overlapping phases. The three phases are: 1) refocus on core business and achieveoperational excellence; 2) continue development as a complete system provider for OEM customers; and3) expand product and engineering services to its installed base of OEM customers.

In March, 2000 the Company announced the spinout of its Communications Product Group into a newsubsidiary, Anatel Communications Corporation. Anatel designs, manufactures and markets Voice overInternet Protocol (VoIP) resource boards, network access boards, and Media Gateway systems and softwarefor the Internet Telecommunications market.

The Company successfully completed the testing, training, software conversion and hardware installationof a new Enterprise Resource Planning (ERP) system.

Mr. Thomas J. Miller was appointed President and Chief Operating OÇcer in October 1999. Mr. John J.Millerick was elected Senior Vice President, Chief Financial OÇcer and Treasurer in January 2000.

(b) Financial Information About Industry Segment

The Company's operations are within a single segment within the electronics industry (MedicalInstrumentation Technology Products). The operations encompass design, manufacture and sale of hightechnology, high-performance, high-precision data acquisition, conversion (analog/digital) and signal process-ing instruments and systems to customers that manufacture products for medical and industrial use.

(c) Narrative Description of Business

Analogic conceives, designs, manufactures, and sells standard and customized high-precision dataacquisition, signal and imaging processing based medical imaging and industrial systems and subsystems.Analogic's principal customers are original equipment manufacturers (OEM) who incorporate Analogic'sstate-of-the art products into systems used in medical, industrial and scientiÑc applications.

Analogic has been a leader in the application of precision analog-to-digital (A/D) and digital-to-analog(D/A) conversion technology, which involves the conversion of continuously varying (i.e., ""analog'')electrical signals, such as those representing temperature, pressure, voltage, weight, velocity, ultrasound andx-ray intensity into and from the numeric (or ""digital'') form required by computers, medical imagingequipment and other data processing equipment and in subsystems and systems based on such technology.

In addition to their precision measurement capabilities, most of Analogic's products perform very high-speed complex calculations on the data being analyzed. Thus, Analogic's products are an integral part of thecommunications link between various analog sensors, detectors or transducers and the people or systemswhich interpret or utilize this information.

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Analogic's products may be divided for discussion purposes into three groupings as described below.These groupings are classiÑed by product technology and not by application.

Medical Technology Products, consisting primarily of electronic systems and subsystems for medicalimaging equipment, accounted for approximately 73% of product, service, engineering and licensing revenue inÑscal 2000.

Analogic's medical imaging data acquisition systems and related computing equipment are incorporatedby U.S., European and Asian manufacturers into advanced X-ray equipment known as Computed Tomogra-phy (CT) scanners. These scanners generate images of the internal anatomy,which are used primarily indiagnosing medical conditions. Analogic's data acquisition and signal processing systems have advanced CTscanner technology by substantially increasing resolution of the image, by reducing the time necessary toacquire the image, and by reducing the computing time required to produce the image. Analogic supplies to itsmedical imaging customers A/D and D/A conversion equipment and complete data acquisition systems. TheCompany also manufactures a complete mobile and other CT scanners incorporating proprietary technology.

In addition, the Company manufactures key subsystems on an OEM basis for ultrasound equipmentmanufacturers. The Company also designs and manufactures radiology, surgical and urology ultrasoundsystems and probes for the end-user market. These scanners generate real-time images of the internalanatomy, which are used for diagnosing medical conditions and for interventional procedures.

The Company manufactures electronics for a family of hard copy laser printers in single and multi-userconÑgurations that address the diagnostic image market. These printers are used in hospitals world wide toprint diagnostic quality images on Ñlm from the electronic data collected by medical imaging equipment suchas CT scanners and MRI scanners. The Company also designs and manufactures for OEM customersadvanced RF ampliÑers, gradient coil ampliÑers and spectrometers for use in Magnetic Resonance Imaging(MRI) equipment. These MRI scanners are used primarily to create diagnostic medical images.

The Company manufactures fetal monitoring products for conversion and display of biomedical signals.These monitors are designed for use in antepartum applications and have the capability to measure, compute,display and print fetal heart rates, maternal contraction frequency and relative intensity to determine bothmaternal and fetal well being.

The Company also manufactures a lightweight, portable, multi-functional, custom patient monitorinstrument which acquire, calculate and display combinations of the Ñve most common vital sign parameters-Electrocardiogram (ECG), Respiration, Temperature, Non Invasive Blood Pressure (NIBP) and PulseOximetry (SpO2). These monitors are designed to be used in a variety of hospital settings such as emergencyroom, step-down general care and surgical centers where ease-of-use, portability, Öexibility and costs areimportant considerations.

The Company also manufactures a broad line of medical connectivity products that allows medicalequipment such as CT Scanners and MRI and ultrasound equipment to attach to local Digital Imaging andCommunications for Medicine (DICOM), Picture Archive & Communications Systems (PACS) and widearea networks. The line includes Computed Radiography (CR) image processing and viewing workstations.

Camtronics, an 81% owned subsidiary, manufactures products which are included herein as medicaltechnology products. Camtronics designs and manufactures multi-modality image and information manage-ment systems for cardiology. This system integrates all cardiac patient data into an enterprise-wideinformation system. The industry leader in cardiac workstation technology, Camtronics also designs andmanufactures state-of-the art digital imaging systems for cardiology and radiology.

Anrad, an 100% owned subsidiary, designs and manufactures a state-of-the-art direct conversion series ofamorphous selenium based, X-ray, Öat panel detectors for diagnostic and interventional applications inmammography and other digital radiology application.

Signal Processing Technology Products, consisting of A/D converters and supporting modules, high-speed digital signal processors such as Array Processors, and image processing equipment, accounted forapproximately 17% of Ñscal 2000 product, service, engineering and licensing revenue.

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The technology developed by Analogic and incorporated within these products is fundamental to all ofthe Company's other products.

A/D converters convert continuously varying ""analog'' signals into the numerical ""digital'' form requiredby microprocessors and other data processing equipment. Analogic manufactures a wide variety of high speed14 and 16 bit low noise converters.

Analogic specializes in the manufacture of high-precision and high performance, rather than lower-cost,low-precision and minimal performance, data conversion products. Typical applications of these devicesinclude the conversion of industrial and biomedical signals into computer language.

The Company manufactures a line of Compact Peripheral Computer Interface (CPCI) boards. Theseproducts are fully compatible with the CPCI form factor and bus structure and take advantage of softwarewritten for the PCIbus. The boards, which are designed for OEM embedded applications requiring precisionmeasurements and high sampling rates, perform acquisition, conditioning, multiplexing, as well as signalprocessing functions, and are supported by Microsoft Windows NT» software.

Analogic manufactures application accelerator and array processors (special purpose computers) whichgenerally receive information from a host computer or data source, rapidly perform the desired calculations,and return the processed data or results to the host computer. The cost per calculation of array processors,which can compute and/or manipulate data at the rate of hundreds of millions of operations per second, is lessthan that of general-purpose computers. Analogic believes its accelerators and array processors have generallybeen cost eÅective when compared with competitive products.

The Company is marketing its array processors for applications such as, Voice Over Internet Protocol(VoIP), X-ray imaging, manufacturing testing, radar and sonar, geophysical exploration, and other technicaland scientiÑc areas. In addition, the Company sells array processors used for image construction in MagneticResonance Imaging (MRI) medical diagnostic systems. The Company also manufactures Digital SignalProcessing (DSP) Öoating point products, which are used in the above-mentioned markets.

Analogic manufactures the EXACT system, an advanced computed tomography imaging system capableof providing data for 3-D images of every object in a package, parcel, or bag. An OEM customer has exclusiverights to marketing the EXACT as part of a comprehensive explosive detection system to scan checkedluggage for aircraft. Analogic is currently pursuing other applications for the EXACT system such as drug andother contraband detection, and providing security for high-risk buildings.

Industrial Technology Products, consisting of test instruments and industrial weight measurementequipment accounted for approximately 10% of Ñscal 2000 product, service, engineering and licensingrevenues.

Test Instruments are used as components of large Automated Test Equipment (ATE) for thesemiconductor test and other industries. These instruments provide precision signal source and measurementcapabilities for testing high performance mixed-signal and analog semiconductors. Various instrumentsprovide a range of speed and accuracy capabilities. Test instruments are also used for stand-alone operation ona test bench.

Industrial weighing products are sold to both OEM and end users and are used in many industrial andprocess control applications requiring high precision weight measurement.

Anatel Communications, a wholly owned subsidiary formed in March 2000, designs, manufactures, andmarkets Voice over Internet Protocol (VoIP) DSP resource boards; network access boards; and MediaGateway development systems and associated software for the Internet Telephony market. Applicationsinclude VoIP Gateways, Softswitch architectures, voice routers (PBXs) and Call Center systems.

Hotel Operation

The Company owns a hotel, which is located adjacent to the Company's principal executive oÇces andmanufacturing facility in Peabody, Massachusetts. The hotel is strategically situated in an industrial park, is in

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close proximity to the historic and tourist area of Boston's North Shore and is approximately 18 miles fromBoston. The hotel has 256 rooms, a ballroom and several other function rooms and appropriate recreationalfacilities. The hotel is managed for the Company under a contract with Marriott Corporation.

Marketing and Distribution

The Company sells its products domestically and abroad directly through the eÅorts of its oÇcers andemployees and through a network of independent sales representatives and distributors located in principalcities around the world. In addition, Analogic subsidiaries in England and Denmark act as distributors.Domestically, Analogic has several regional sales oÇces staÅed by salespeople who sell the Company'sproducts in the surrounding areas and supervise independent sales representatives and distributors in theirregions. Some of Analogic's distributors also represent manufacturers of competing products.

Sources of Components/Raw Materials

In general, Analogic's products are composed of company-designed proprietary integrated circuits,printed circuit boards, and precision resistor networks, manufactured by Analogic and others in accordancewith Analogic's speciÑcations, as well as standard electronic integrated circuits, transistors, displays and othercomponents. Most items procured are believed to be available from more than one source. However, it may benecessary, if a given component ceases to be available, for Analogic to incur additional expense in order tomodify its product design to adapt to a substitute component or to purchase new tooling to enable a newsupplier to manufacture the component. Also, from time to time the availability of certain electroniccomponents has been disrupted. Accordingly, Analogic carries a substantial inventory of raw materialcomponents in an eÅort to assure its ability to make timely delivery to its customers.

Patents and Licenses

The Company holds approximately 80 patents of varying duration issued in the United States which coverthe design and manufacture of its products. In many instances, the Company holds corresponding foreignpatents. The Company regularly Ñles both foreign and domestic patent applications and continuations to coverboth new and improved methods, apparatus, processes, designs and products. At present, more than 350 U.S.and foreign patents applications are pending.

The Company also relies on a combination of trade secret, copyright and trademark laws, and contractualagreements to safeguard its proprietary rights in technology and products. In seeking to limit access tosensitive information to the greatest practical extent, the Company routinely enters into conÑdentiality andassignment of invention agreements with each of its employees and nondisclosure agreements with its keycustomers and vendors.

Management believes that any legal protection aÅorded by patent, copyright, and trade secret laws are ofsecondary importance as a factor in the Company's ability to compete; its future prospects are more a functionof the continuing level of excellence and creativity of engineers in developing products which satisfy customerneeds, and the innovative skills, competence and marketing and managerial skills of its personnel in sellingthose products. Moreover, the Company believes that market positioning and rapid market entry are equallyimportant to the success of its products. Management is of the opinion that the loss of patent protection wouldnot have a material eÅect on the Company's competitive position.

Seasonal Aspect of Business

There is no material seasonal element to the Company's business, although plant closings in the summer,particularly in Europe, tend to decrease the activity of certain buying sources during the Ñrst quarter of theCompany's Ñscal year.

4

Working Capital Matters

The Company does not carry a substantial inventory of Ñnished goods but does carry a substantialinventory of raw material components and work-in-process to enable it to meet its customers' deliveryrequirements. (See Note 4 of Notes to Consolidated Financial Statements.)

Material Customers

The Company's three largest customers, each of which is a signiÑcant and valued customer, were Philips,General Electric and Toshiba, which accounted for approximately 16%, 10%, and 9%, respectively, of product,service, engineering and licensing revenue for the Ñscal year ended July 31, 2000. Loss of any one of thesecustomers would have a material adverse eÅect upon the Company's business. The Company does businesswith Philips through several of the Company's Product Groups and Subsidiaries principally under OEMcontracts. In addition, Philips funds research and development of some products to be manufactured byAnalogic for Philips. No other individual customer accounted for as much as 6% of the Company's product,service, engineering and licensing revenue during Ñscal 2000. The Company's ten largest customers, includingPhilips, General Electric and Toshiba accounted for approximately 60% of product, service, engineering andlicensing revenue during Ñscal 2000.

Backlog

The backlog of orders at July 31, 2000 was approximately $96.4 million compared with approximately$86.6 million at July 31, 1999. This increase is principally related to Medical Technology and SignalProcessing products. Many of the orders in the Company's backlog permit cancellation by the customer undercertain circumstances. To date, Analogic has not experienced material cancellation of orders. The Companyreasonably expects to ship most of its July 31, 2000 backlog during Ñscal 2001.

Government Contracts

The amount of the Company's business that may be subject to renegotiation of proÑts or termination ofcontracts or subcontracts at the election of the Government is insigniÑcant.

Competition

Analogic is subject to competition based upon product design, performance, pricing, quality and service.Analogic believes that its innovative engineering and product reliability have been important factors in itsgrowth. While the Company tries to maintain competitive pricing on those products which are directlycomparable to products manufactured by others, in many instances Analogic's products will conform to moreexacting speciÑcations and carry a higher price than analogous products manufactured by others.

Analogic's medical X-ray imaging systems are highly specialized. The Company considers its selection byits OEM customers for design and manufacture of these products and its other medical products to be muchless a function of other competitors in the Ñeld than it is of the ""make-or-buy'' decision of its individual OEMcustomers. Many OEM customers and potential OEM customers of the Company have the capacity to designand manufacture these products for themselves. In the Company's area of expertise, the continued signing ofnew contracts indicates continued strength in the Company's relationship with its major customers, althoughsome of these customers continue to commit to shorter-term contracts.

Analogic's competitors include divisions of some larger, more diversiÑed organizations, as well as severalspecialized companies. Some of them have greater resources and larger staÅs than Analogic. The Companybelieves that, it is a leading manufacturer of CT scanner and MRI electronic sub-systems in the medicalindustry.

Research and Product Development

Research and product development is a signiÑcant factor in Analogic's business. The Company maintainsa constant and comprehensive research and development program directed toward the creation of new

5

products as well as toward the improvement and reÑnement of its present products and the expansion of theiruses and applications.

Company funds expended for research and product development amounted to $38,260,000 in Ñscal 2000,$39,598,000 in Ñscal 1999, and $36,177,000 in Ñscal 1998. Analogic intends to continue its emphasis on newproduct development. As of July 31, 2000, Analogic had approximately 530 employees, including electronicdevelopment engineers, software engineers, physicists, mathematicians, and technicians engaged in researchand product development activities. These individuals, in conjunction with the Company's salespeople, alsodevote a portion of their time assisting customers in utilizing the Company's products, developing new uses forthese products, and anticipating customer requirements for new products.

During Ñscal 2000, the Company capitalized $2,972,000 of computer software testing and coding costsincurred after technological feasibility was established. These costs will be amortized by the straight-linemethod over the estimated economic life of the related products, not to exceed three years. Amortization ofcapitalized software amounted to $1,778,000 in Ñscal 2000.

Environmental Protection

The Company does not anticipate any material eÅect upon its capital expenditures, earnings orcompetitive position resulting from compliance by it and its subsidiaries with presently enacted or adoptedFederal, State and local provisions regulating the discharge of materials into the environment, or otherwiserelating to the protection of the environment.

Employees

As of July 31, 2000, the Company had approximately 1,830 employees.

Financial Information about Foreign and Domestic Operations and Export Revenue

Domestic and foreign revenues were $266,641,000 and $30,978,000 respectively for Ñscal 2000 comparedto $255,142,000 and $24,552,000 in Ñscal 1999 and $264,280,000 and $30,192,000 in Ñscal 1998. (See Note 16of Notes to Consolidated Financial Statements for further information regarding foreign and domesticoperations.)

Export revenue, primarily from sales of products and services to companies in Europe and Asia,amounted to approximately $93,911,000 (34%) in Ñscal 2000 as compared to approximately $95,504,000(37%) in Ñscal 1999, and approximately $92,292,000 (33%) in Ñscal 1998. Management believes that theCompany's export revenue is at least as proÑtable as its domestic revenue. The Company's export revenue isprimarily denominated in U.S. dollars.

Management does not believe the Company's foreign and export revenue is subject to signiÑcantly greaterrisks than its domestic revenue.

Item 2. Properties

Analogic's principal executive oÇces and major manufacturing facility are located in a building, ownedby the Company, which it constructed on its site in Peabody, Massachusetts. This facility consists ofapproximately 404,000 square feet of manufacturing, engineering, and oÇce space. The Company ownsapproximately 65 acres of land at this location, which will accommodate future consolidation and expansion asrequired. The Company uses approximately 7¥ acres of this land for the Peabody Marriott Hotel which isowned by a wholly owned subsidiary of the Company and managed by the Marriott Corporation.

The Company's 81% owned subsidiary, Camtronics, owns a 40,000 square foot manufacturing and oÇcebuilding located on an eleven-acre site in Hartland, Wisconsin. Camtronics recently announced theconstruction of an addition to the existing building of 35,000 square feet. The new space will be available inthe fourth quarter of Ñscal 2001 and will enable the Company to consolidate and expand on its current site andeliminate approximately 18,000 square feet of lease obligations.

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The Company leases a modern one-story brick building containing approximately 41,000 square feet ofmanufacturing, engineering and oÇce space located in WakeÑeld, Massachusetts. This building is leased for aterm expiring on July 31, 2003.

The Company leases two modern adjacent brick and concrete block buildings in Danvers, Massachusetts.These two buildings total approximately 170,000 square feet of manufacturing, engineering and oÇce spaceand are leased for a term expiring on July 31, 2001. A total of 155,000 square feet of these buildings has beensublet on a triple net basis, self-renewing lease to Siemens Medical Electronics, Inc. One of the subleases, for65,000 sq. ft., will terminate on December 1, 2000. The other sublease will terminate on July 31, 2001.

The Company leases approximately 30,200 square feet of manufacturing, engineering, and oÇce space inChelmsford, Massachusetts that is occupied by its wholly owned subsidiary, SKY Computers, Inc. The spaceis leased for a three-year term expiring May 31, 2002.

The Company's 100% owned subsidiary, B-K Medical Systems A/S (B-K), leases a modern two-storybuilding containing a total of approximately 54,000 square feet of manufacturing, engineering, and oÇcespace. The building is located in Gentofte, Denmark (a suburb of Copenhagen). The building is leased for aterm of ten years commencing in June 1993. The lease may be cancelled by B-K with six months notice.

The Company owns a modern two-story building containing approximately 49,000 square feet ofmanufacturing and oÇce space in Peabody, Massachusetts, adjacent to the Company's principal executiveoÇces. This building is presently leased to an unrelated party for a term of Ñve years expiring September 30,2002. The lease has options to extend the term for two additional Ñve year periods.

In conjunction with the asset purchase of the Noranda Advanced Materials' medical detectors and puremetals business, ANRAD assumed a lease for approximately 42,000 square feet of manufacturing, engineeringand oÇce space in St. Laurent, Quebec. ANRAD has sub-leased approximately 9,300 square feet to anunrelated third party for a term of Ñve years expiring in June 2005. ANRAD's lease expires on February 28,2015.

See Item 13 of this Report and Note 7 of Notes to Consolidated Financial Statements for furtherinformation concerning certain of the aforesaid leases.

Analogic and its subsidiaries lease various other facilities used for sales and service purposes. TheCompany does not consider any of these leases to be material.

Analogic owns substantially all of the machinery and equipment used in its business. Managementconsiders that the Company's plant and equipment are in good condition and are adequate for its currentneeds.

Item 3. Legal Proceedings

There are no material legal proceedings pending against the Company or its subsidiaries or of which anyof their property is the subject.

Item 4. Submission of Matters to a Vote of Security Holders

None

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PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters

The Company's Common Stock trades on the NASDAQ Stock Market under the symbol: ALOG. Thefollowing table sets forth the range of high and low prices for the Common Stock, as reported by NASDAQduring the quarterly periods indicated:

Fiscal Year High Low

2000 First Quarter $37.00 $23.00

Second Quarter 37.50 25.00

Third Quarter 50.25 32.56

Fourth Quarter 46.69 30.25

1999 First Quarter $41.63 $31.00

Second Quarter 40.50 31.00

Third Quarter 39.88 32.13

Fourth Quarter 37.88 27.13

As of August 31, 2000, there were approximately 855 holders of record of the Common Stock.

Dividends of $.07 per share were declared for each of the quarters of Ñscal 2000 and Ñscal 1999. Thepolicy of the Company is to retain suÇcient earnings to provide funds for the operation and expansion of itsbusiness.

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Item 6. Selected Financial Data

Year Ended July 31

2000 1999 1998 1997 1996

(In thousands, except per share data)

Total Revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $297,619 $279,694 $294,472 $256,729 $230,460

Income from operations and interest anddividend income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22,488 29,991 39,996 32,107 16,981

Net Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,108 19,513 23,888 20,090 13,065

Earnings per common and commonequivalent share:

BasicÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1.10 $ 1.54 $ 1.89 $ 1.60 $ 1.05

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.10 1.53 1.87 1.58 1.04

Dividends paid per common share ÏÏÏÏÏÏ $ 0.28 $ 0.27 $ 0.23 $ 0.20 $ 0.18

Number of shares used in computation ofper share data:

BasicÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,817 12,683 12,614 12,554 12,455

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,883 12,791 12,793 12,702 12,562

Cash, Cash equivalents, and marketablesecurities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $116,374 $124,202 $121,800 $114,450 $100,549

Working Capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 212,977 205,872 200,718 186,131 168,515

Total AssetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 335,576 315,013 302,957 282,359 265,162

Long-term debt (including capitalizedleases) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,639 6,714 7,704 8,614 9,455

Stockholders' EquityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 279,569 267,401 251,255 228,216 211,800

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Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations

Results of Operations

Fiscal 2000 Compared to Fiscal 1999

Product, service, engineering, and licensing revenues for Ñscal 2000 were $278,543,000 as compared to$260,945,000 for Ñscal 1999, an increase of 7%. The increase of $17,598,000 was principally due to an increasein sales of Industrial Technology Products of $11,133,000, as a result of higher demand for the Company'shigh frequency Automatic Test Equipment (ATE) boards and an increase in sales of $6,492,000 in the SignalProcessing Technology Products primarily due to sales of EXACT (Explosive Assessment ComputedTomography) systems. Revenues of Medical Technology Products were level with the prior year. Otheroperating revenue of $13,038,000 and $12,015,000 represents revenue from the Hotel operation for Ñscal 2000and 1999, respectively. The increase of $1,023,000 in the hotel revenue was due to an increase in occupancyand room rates over the prior year.

Interest and dividend income for Ñscal 2000 was $6,038,000 as compared to $6,734,000 for Ñscal 1999.The decrease of $696,000 was primarily due to interest earned from the City of Peabody on real estate taxabatement recorded in Ñscal year 2000 of $282,000 versus $842,000 recorded in Ñscal year 1999.

Cost of sales compared to total net sales for Ñscal 2000 and 1999 increased 3% to 63% from 60%. Theincrease was primarily due to reduction in selling prices and higher manufacturing costs. Operating costsassociated with the Hotel for Ñscal years 2000 and 1999 were $6,203,000 and $6,098,000, respectively.

General and administrative expenses were $27,526,000 in the year ended July 31, 2000 compared to$21,230,000 in the year ended July 31, 1999. The increase of $6,296,000 was due primarily to additionalexpenses associated with our Canadian subsidiary, ANRAD, acquired in June 1999; increased personnelexpenses; additions to the bad debt provision; and costs associated with a new Enterprise Resource Planning(ERP) system, partially oÅset by a decrease in staÇng in the B-K subsidiary.

Selling expenses were $26,207,000 in the year ended July 31, 2000 versus $25,735,000 in the year endedJuly 31, 1999. The increase of $472,000 was primarily due to increase in sales personnel, marketing programs,partially oÅset by reduced staÇng in the B-K subsidiary.

Research and product development expenses were $38,260,000 in the year ended July 31, 2000,compared to $39,598,000 in the year ended July 31, 1999. The decrease of $1,338,000 is Ñscal year 2000 versusÑscal year 1999, was primarily due to higher capitalized software costs and lower expenses in the B-Ksubsidiary.

Computer software costs of $2,972,000 and $2,462,000 were capitalized in Ñscal 2000 and 1999,respectively. Amortization of capitalized software amounted to $1,778,000 and $1,977,000 in Ñscal 2000 and1999, respectively.

A loss of foreign exchange for Ñscal 2000 amounted to $159,000, compared to $59,000 loss for Ñscal 1999,primarily from the Company's B-K subsidiary.

The amortization of excess of fair value of net assets over cost acquired from B-K was $113,000 each yearfor Ñscal 2000 and 1999.

The Company's share of losses of a privately held company amounted to $2,225,000 and $4,780,000 inÑscal 2000 and Ñscal 1999, respectively. (See Note 5 of Notes to Consolidated Financial Statements.)

During Ñscal 2000, the Company's investment in Analogic ScientiÑc was increased by $925,000 reÖectingthe Company's share of Analogic ScientiÑc's proÑt. The company did not record any income or loss associatedwith this investment in Ñscal 1999. (See Note 5 of Notes to the Consolidated Financial Statements.)

In Ñscal 2000, the Company received the Ñnal distribution of 1,771,802 shares of restricted securities in apublicly traded company from a limited partnership. At July 31, 2000, the Company recognized a loss of

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approximately $110,000 on the value of these shares. (See Note 5 of Notes to the Consolidated FinancialStatements.)

Minority interest in the net income of the Company's consolidated subsidiary, Camtronics, in Ñscal 2000amounted to $487,000 compared to $758,000 for Ñscal 1999. During Fiscal Year 2000 the Founders andemployees of Camtronics exercised their rights to sell their shares back to Camtronics. Subsequent to thesetransactions, the Company's share in Camtronics increased to approximately 81%. (See Note 2 of Notes toConsolidated Financial Statements.)

The eÅective tax rate increased from 20% to 31% in Ñscal 2000 primarily as a result of net losses offoreign subsidiaries for which there were no tax beneÑts in Ñscal 2000. Also, in Ñscal 1999 the eÅective tax ratereÖected the beneÑt of a reversal of prior year tax provisions.

Net income for Ñscal 2000 was $14,108,000, as compared to net income of $19,513,000 for the sameperiod last year. Basic per-share earnings were $1.10 compared to $1.54 for Ñscal 1999. Diluted per-shareearnings were $1.10 compared to $1.53 for Ñscal 1999.

Fiscal 1999 Compared to Fiscal 1998

Product, service, engineering, and licensing revenues for Ñscal 1999 were $260,945,000 as compared to$276,562,000 for Ñscal 1998, a decrease of 6%. The decrease of $15,617,000 was principally due to thecompletion of a foreign government contract with our Danish subsidiary as well as softness in the Asian andSouth American markets, which adversely impacted our OEM customers. Reduced demand for products forthe Computer Telephony and Semiconductor industries contributed approximately $6,000,000 to the revenueshortfall. Partially oÅsetting these revenue declines were initial fourth quarter shipments of the EXACTsystem used for airport security. Other operating revenue of $12,015,000 and $12,036,000 represents revenuefrom the Hotel operation for Ñscal 1999 and 1998, respectively.

Interest and dividend income increased $860,000 primarily due to interest earned from the City ofPeabody on a real estate tax abatement.

The percentage of total cost of sales to total net sales for Ñscal 1999 and 1998 was 60%. Operating costsassociated with the Hotel for Ñscal years 1999 and 1998 were $6,098,000 and $6,091,000, respectively.

General and administrative and selling expenses increased $825,000 or 2%, primarily due to higheroperating costs in the Company's Danish subsidiary, partially oÅset by lower staÇng requirements within theCompany's domestic operations. Research and product development expenses increased $3,421,000 primarilydue to the expanding eÅort applicable to developing a new class of complex medical imaging systems.

Computer Software costs of $2,462,000 and $1,658,000 were capitalized in Ñscal 1999 and 1998,respectively. Amortization of capitalized software amounted to $1,977,000 and $2,406,000 in Ñscal 1999 and1998, respectively.

A loss of foreign exchange for Ñscal 1999 amounted to $59,000, compared to $4,000 loss for Ñscal 1998,primarily from the Company's subsidiary in Denmark.

The amortization of excess of fair value of net assets over cost acquired from B-K was $113,000 and$335,000 in Ñscal 1999 and 1998, respectively.

The Company's share of losses of a privately held company amount of $4,780,000 and $3,488,000 duringÑscal 1999 and 1998, respectively. (See note 5 of Notes to Consolidated Financial Statements.)

During Ñscal 1998, the Company's investment in Analogic ScientiÑc was decreased by $575,000reÖecting the Company's share of Analogic ScientiÑc's losses. The Company did not record any income or lossassociated with this investment in 1999. (See Note 5 of Notes to Consolidated Financial Statements.)

During Ñscal 1998, the Company recorded a write down of $400,000, reÖecting a partial impairment of its19% investment in another privately held company. There were no adjustments in Ñscal 1999.

11

During Ñscal 1998, the Company sold 140,560 common shares of a publicly traded company, resulting ina gain of $997,000. (See Note 5 of Notes to Consolidated Statements.)

Minority interest in the net income of the Company's consolidated subsidiary, Camtronics, for Ñscal 1999amounted to $758,000 compared to $1,098,000 for Ñscal 1998. During the fourth quarter of Ñscal 1998, theCompany purchased from one of the founders of Camtronics his entire equity interest in Camtronics for$1,600,000. After this transaction, the Company's share in Camtronics increased to approximately 77% (SeeNote 2 of Notes to Consolidated Financial Statements.)

The eÅective tax rate for Ñscal 1999 was 20% vs. 32% for Ñscal 1998. This decrease was due to theincreased beneÑts of tax exempt interest, increased general business credits, the impact of the resolution ofprior year tax audit and increased FSC (Foreign Sales Corporation) beneÑt.

Net Income for Ñscal 1999 was $19,513,000, as compared to net income of $23,888,000 for the sameperiod last year. Basic per-share earnings were $1.54 down from $1.89. Diluted per-share earnings were $1.53down from $1.87.

Financial Position

The Company's balance sheet at July 31, 2000, reÖects a current ratio of 6.0 to 1, compared to 7.0 to 1 atJuly 31, 1999. Cash, cash equivalents and marketable securities, as well as accounts and notes receivable,constitute approximately 70% of current assets at July 31, 2000. Liquidity is sustained principally throughfunds provided from operations, with short-term time deposits and marketable securities available to provideadditional sources of cash. The Company places its cash investments in high credit quality Ñnancialinstruments and, by policy, limits the amount of credit exposure to any one Ñnancial institution. Managementdoes not anticipate any diÇculties in Ñnancing operations at anticipated levels. The Company's debt to equityratio was .20 to 1 at July 31, 2000 compared to .18 to 1 at July 31, 1999.

The Company faces limited exposure to Ñnancial market risks, including adverse movements in foreigncurrency exchange rates and changes in interest rates. These exposures may change over time as businesspractices evolve and could have a material adverse impact on the Company's Ñnancial results. The Company'sprimary exposure has been related to local currency revenue and operating expenses in Europe.

The carrying amounts reÖected in the consolidated balance sheets of cash and cash equivalents, tradereceivables, and trade payables approximate fair value at July 31, 2000 due to the short maturities of theseinstruments.

The Company maintains a bond investment portfolio of various issuers, types, and maturities. TheCompany's cash and investments include cash equivalents, which the Company considers to be investmentspurchased with original maturities of three months or less. Investments having original maturities in excess ofthree months are stated at amortized cost, which approximates fair value, and are classiÑed as available forsale. A rise in interest rates could have an adverse impact on the fair value of the Company's investmentportfolio. The Company does not currently hedge these interest rate exposures.

In Ñscal 2000 funds provided from operations were $14,260,000. The major components of the$14,260,000 were net income of $14,108,000 and depreciation and amortization of $13,787,000 oÅset byincreases in inventories of $9,903,000 and accounts, notes, and aÇliates receivables of $6,924,000.

The following investing activities resulted in a cash decrease of $12,030,000. During Ñscal 2000, theCompany invested an additional $3,068,000 in a privately held company, which funded research anddevelopment for the design and manufacture of medical imaging equipment. Capital expenditures for Ñscal2000 amounted to $12,998,000 and capitalized computer software costs were approximately $2,972,000. TheCompany also decreased its investment in marketable securities by $6,035,000, net of maturities.

Financing activities resulted in a net cash reduction of $2,806,000 primarily due to dividends paid toshareholders of $3,590,000 and payments of debt and capital lease obligations of $987,000 partially oÅset bythe proceeds from stock options exercised of $1,771,000.

12

Total investments in and advances to aÇliated companies increased by $1,658,000. This increase wasprimarily due to an additional investment of $3,068,000 in a privately held company and $925,000 in theCompany's share of Analogic ScientiÑc's proÑts, partially oÅset by $2,225,000 in the Company's share ofequity losses from a privately held company.

Notes Payable decreased by $1,075,000 to $5,639,000 at the end of Ñscal 2000 primarily due torepayment of notes payable of $361,000 and obligations under capital leases of $714,000.

Minority Interest in Consolidated Subsidiary decreased $318,000. This represents the minority interest inCamtronics.

The Company's three largest customers, each of which is a signiÑcant and valued customer, were Philips,General Electric and Toshiba, which accounted for approximately 16%, 10%, and 9%, respectively, of product,service, engineering, and licensing revenue for the Ñscal year ended July 31, 2000. Loss of any one of thesecustomers would have a material adverse eÅect upon the Company's business.

As part of a stock repurchase program authorized by the Board of Directors, the Company purchased16,000 shares of common stock for its treasury during Ñscal 1999 at an aggregate cost of $549,000. No shareswere repurchased during Ñscal 2000.

Impact of InÖation

Overall, inÖation has not had a material impact on the Company's operations during the past three Ñscalyears.

Accounting Standards

In June 1998, the Financial Accounting Standards Board, (""FASB'') issued Statement of FinancialAccounting Standards (SFAS No. 133), ""Accounting for Derivative Instruments and Hedging Activities.''The standard established accounting and reporting standards requiring the recognition of all derivativeinstruments as either assets or liabilities in the statement of Ñnancial position and the measure of thoseinstruments at fair value. In June 1999, the FASB issued SFAS No. 137, which defers the eÅective date ofSFAS No. 133 to Ñscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138,which amends certain derivative instruments and certain hedging activities in SFAS No. 133. Because thecompany does not currently hold any derivative instruments and does not currently engage in hedgingactivities, we expect the adoption of SFAS No. 133 and SFAS No 138 will not have a material impact on ourÑnancial position or operating results.

In December 1999, the Securities and Exchange Commission issued StaÅ Accounting Bulletin No. 101(""SAB 101'') ""Revenue Recognition in Financial Statements,'' as amended by SAB 101A and SABNo. 101B (""SAB 101''), which is eÅective no later than the quarter ending July 31, 2001. SAB 101 clariÑesthe Securities and Exchange Commission's views regarding the recognition of revenue. The Company willadopt SAB 101 in the fourth quarter of 2001. The Company is currently evaluating the impact SAB 101 willhave on the Company's Ñnancial position and results of operations.

In March 2000, the Financial Accounting Standards Board issued Interpretation No. 44, ""Accounting forCertain Transactions Involving Stock Compensation Ì an interpretation of Accounting Principles Board(APB) Opinion No. 25'' (FIN 44). FIN 44 clariÑes the application of APB Opinion No. 25 including: thedeÑnition of an employee for purposes of applying APB Opinion No. 25, the criteria for determining whether aplan qualiÑes as a noncompensatory plan, the accounting consequence of various modiÑcations to the terms ofpreviously Ñxed stock options or awards, and the accounting for an exchange of stock compensation awards ina business combination. FIN 44 is eÅective July 1, 2000, but certain conclusions in FIN 44 cover speciÑcevents that occurred after either December 15, 1998 or January 12, 2000. The Company does not expect theapplication of FIN 44 to have a material impact on its results of operations or Ñnancial position.

13

Year 2000 Update

The Company has successfully implemented its new Enterprise Resource Planning (ERP) system duringÑscal year 2000. Due to the size and complexity of the system, the company had anticipated and hadexperienced problems with the implementation. The Company has resolved these problems and the system isfunctioning as planned.

The Company's full cost to implement the ERP system, which included hardware, software, license andconsulting costs and costs incurred by Company personnel dedicated to the project, was $8.5 million. TheCompany capitalized $6.3 million and expensed the remaining costs of $2.2. The total cost of the project wasfunded through operating cash Öows. The Company believes that it did not spend signiÑcant funds in excess ofthe monies spent on the ERP system to become Year 2000 compliant.

Item 8. Financial Statements and Supplementary Data

The Ñnancial statements and supplementary data are listed under PART IV, Item 14 in this Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

PART III

Item 10. Directors and Executive OÇcers of the Registrant

(a) Directors

Director Expiration Other OÇces HeldName Age Since Of Term* At August 31, 2000

Bernard M. GordonÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 73 1969 2001 Chairman of the Board and ChiefExecutive OÇcer

Thomas J. Miller, Jr. ÏÏÏÏÏÏÏÏÏÏÏÏ 43 1999 2003 President and Chief OperatingOÇcer

John A. Tarello ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 69 1979 2001 Ì

M. Ross Brown ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66 1984 2002 Ì

Edward F. VoborilÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 57 1990 2002 Ì

Gerald L. WilsonÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 61 1980 2001 Ì

Bruce W. Steinhauer ÏÏÏÏÏÏÏÏÏÏÏÏ 67 1993 2003 Ì

* The Board of Directors is divided into three classes, each having a three-year term of oÇce. The term of oneclass expires each year. Directors hold oÇce until the Annual Meeting of Stockholders held during the yearnoted and until their respective successors have been duly elected and qualiÑed.

(b) Executive OÇcers

Date Since OÇceName Age OÇce Held Has Been Held

Bernard M. Gordon ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 73 Chairman of the Board and Chief 1969Executive OÇcer

Thomas J. Miller, Jr. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43 President and Chief Operating OÇcer 1999

John J. Millerick ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52 Senior Vice President, Chief Financial 2000OÇcer and Treasurer

Michael MagniÑco ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 56 Vice President 1999

Julian Soshnick ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 68 Vice President, General Counsel and 1982Clerk

14

Each such oÇcer is elected for a term continuing until the Ñrst meeting of the Board of Directorsfollowing the annual meeting of stockholders, and in the case of the President, Treasurer and Clerk, until theirsuccessors are chosen and qualiÑed; provided that the Board may remove any oÇcer with or without cause.

(c) IdentiÑcation of certain signiÑcant employees:

None

(d) Family relationships:

None

(e) Business Experience:

Bernard M. Gordon has been the Chairman of the Board of Directors of the Company since 1969 and,was President from 1980 to 1995.

Thomas J. Miller, Jr. joined the Company as President and Chief Operating OÇce in October 1999.Mr. Miller was the President and CEO of Carl Zeiss, Inc. from 1997 to 1999. Prior to Carl Zeiss, Inc.,Mr. Miller was Group Vice President, Imaging Systems, for Siemens Medical Systems, Inc. from 1995 to1997.

John J. Millerick joined the Company as Senior Vice President, Chief Financial OÇcer and Treasurer inJanuary 2000. Mr. Millerick was previously Senior Vice President and Chief Financial OÇcer of CalCompTechnology Inc. from 1996 to 1999. Prior to CalComp Technology Inc., Mr. Millerick was Vice President-Finance of Digital Equipment Corporation's Personal Computer Unit from 1994 to 1995. Before joiningDigital Equipment Corporation, Mr. Millerick served in several management positions at Wang Laboratories,leaving as Vice President-Corporate Controller and Acting Chief Financial OÇcer.

Michael J. MagniÑco joined the Company in November 1998 as Vice President of Manufacturing andwas promoted to Vice President of Corporate Operations in November 1999. Mr. MagniÑco was previouslySenior Vice President of Operations for the Racal Data Group, a subsidiary of Racal Electronics, plc, from1993 to 1997.

Julian Soshnick joined the Company in October 1981 as General Counsel and has served as a VicePresident since July 1982 and Clerk since 1988.

John A. Tarello retired from Analogic in November 1999. Mr. Tarello was the Company's Controllerfrom May 1970 through July 1982, a Vice President of the Company from 1971 to 1980, a Senior VicePresident since 1980, and Treasurer since 1985. He is also a director of Spire Corporation.

M. Ross Brown retired from Analogic in November 1999. Mr. Brown joined the Company inAugust 1984 and was responsible for managing its manufacturing operations. He was elected a Vice Presidentin October 1984.

Edward F. Voboril has been President and CEO of Wilson Greatbatch Technologies of Clarence, NewYork since December 1990. He was elected Chairman of the Board in 1997.

Dr. Gerald L. Wilson is the former Dean of the School of Engineering at Massachusetts Institute ofTechnology and the Vannevar Bush Professor of Engineering at the Massachusetts Institute of Technology.Dr. Wilson has served on MIT's faculty since 1965 and currently serves as a Professor of Electrical andMechanical Engineering. He is a trustee of NSTAR Corporation and a director of SATCON Corporation.

Dr. Bruce W. Steinhauer became the President and Chief Executive OÇcer of the Regional MedicalCenter at Memphis in 1998. Prior to this position, he was the Chief Executive OÇcer of the Lahey-HitchcockClinic from 1992 to 1998. Prior to that he was Senior Vice President for Medical AÅairs and Chairman of theBoard of Governors for the Medical Group Practice of the Henry Ford Hospital form 1988 to 1992.

15

(f) Involvement in certain legal proceedings:

None

(g) Promoters and Control Persons:

Inapplicable

Compliance with Section 16(a) of the Exchange Act

The Company is unaware of any failure to Ñle on a timely basis any reports required by Section 16(a) ofthe Exchange Act by any ""reporting person'', pursuant to Item 405 of Regulation S-K.

16

Item 11. Executive Compensation

Executive Compensation

SUMMARY COMPENSATION TABLE

The following table sets forth certain compensation information for the Chief Executive OÇcer and eachof the next four most highly compensated executive oÇcers of the Company during the last Ñscal year(""Named OÇcers'') for services rendered in all capacities for the last three Ñscal years.

Long-Term Compensation Awards

Restricted All OtherAnnual CompensationName and Total Annual Stock Awards Stock Options Compensation

Principal Position Year Salary Bonuses Compensation (A)(B) #(C) (D)

Bernard M. Gordon ÏÏÏÏÏÏÏÏ 2000 $350,000 $ 25,000 $375,000 Ì Ì $ 6,800

Chairman (CEO) 1999 350,000 25,000 375,000 Ì Ì 6,900

1998 339,000 50,000 389,000 Ì Ì 6,000

Thomas J. Miller, Jr.(1)ÏÏÏÏ 2000 $315,000 $200,000 $515,000 $1,511,280 Ì $24,500

President (COO) 1999 0 0 0 Ì Ì Ì

1998 0 0 0 Ì Ì Ì

John J. Millerick(2) ÏÏÏÏÏÏÏ 2000 $114,000 $ 0 $114,000 Ì 20,000 $ 2,700

Senior Vice President, 1999 0 0 0 Ì Ì Ì

Chief Financial OÇcer 1998 0 0 0 Ì Ì Ì

and Treasurer Ì

Michael MagniÑco(3)ÏÏÏÏÏÏ 2000 $180,000 $ 15,000 $195,000 Ì Ì $ 6,500

Vice President 1999 127,900 15,000 142,900 $ 185,000 5,000 9,900

1998 0 0 0 Ì Ì Ì

Julian Soshnick ÏÏÏÏÏÏÏÏÏÏÏ 2000 $206,000 $ 20,000 $226,000 Ì Ì $ 5,400

Vice President and 1999 200,000 20,000 220,000 Ì Ì 5,200

General Counsel 1998 193,700 40,000 233,700 Ì Ì 5,100

Notes to Compensation Table

(1) Mr. Miller joined the Company in October 1999.

(2) Mr. Millerick joined the Company in January 2000.

(3) Mr. MagniÑco joined the Company in November 1998.

(A) Represents stock grants under the Company's Key Employee Stock Bonus Plan dated March 14, 1983,as amended and restated on January 27, 1988, pursuant to which Common Stock of the Company maybe granted to key employees to encourage them to exert their best eÅorts on behalf of the Company.Each Recipient of the Common Stock pursuant to the Bonus Plan is required to execute a noncompeti-tion agreement in a form satisfactory to the Company. The Bonus Plan is administered by a committeeappointed by the Board of Directors consisting of the Chairman of the Board and three other Directorswho are not eligible to participate in the Bonus Plan. Generally, the Common Stock granted pursuant tothe Bonus Plan is not transferable for a period of three years from the date of the grant and is subject to arisk of forfeiture in the event that the recipient leaves the employ of the Company during this period forany reason. Generally, during the subsequent four-year period, the transfer restrictions will lapse withrespect to 25% of the Common Stock for each year the recipient remains in the employ of the Company.Failure to remain in the Company's employ during all of the subsequent four-year period will result in aforfeiture of shares as to which restrictions on disposition still exist. The Common Stock grantedpursuant to the Bonus Plan is held in escrow by the Company until such restrictions on disposition lapse.However, while is escrow, the recipient has the right to vote such shares of Common Stock and toreceive any cash dividends thereon. The Board of Directors, acting upon the recommendation of the

17

Stock Bonus Plan Committee, may at the time of grant designate a diÅerent schedule upon which thetransfer restrictions lapse.

(B) As of July 31, 2000, the following table reÖects stock bonus awards for which transfer restrictions havenot yet lapsed.

Market Value atShares Date of Grant

Thomas J. Miller, Jr. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 60,000 $1,511,280

Michael MagniÑco ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,000 185,000

(C) Represents options granted pursuant to the Key Employee Stock Option Plan dated June 11, 1998.

(D) Represents car allowance and Company's ProÑt Sharing distribution for all OÇcers listed. In addition,includes relocation assistance for Mr. Miller in Ñscal 2000 and Mr. MagniÑco in Ñscal 1999.

Stock Option Grants in Last Fiscal Year

Mr. Millerick was awarded 20,000 stock options in Ñscal 2000 under the 1998 Key Employee StockOption Plans. No other oÇcers were awarded stock options.

Stock Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

The following table indicates (i) stock options exercised by the Named OÇcers during the last Ñscalyear; (ii) the number of shares subject to exercisable (vested) and unexercisable (unvested) stock options asof July 31, 2000; and (iii) the Ñscal year-end value of ""in-the-money'' unexercised options.

Number of Value of UnexercisedUnexercised Options In-The-Money-OptionsNumber ofAt Fiscal Year End At Fiscal Year End(A)(B)Shares Acquired Value

On Exercise Realized(A) Exercisable Unexercisable Exercisable Unexercisable

Bernard M. Gordon ÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì Ì

Thomas J. Miller, Jr. ÏÏÏÏÏÏ Ì Ì Ì Ì Ì Ì

John J. MillerickÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 20,000 Ì $200,000

Michael MagniÑco ÏÏÏÏÏÏÏÏ Ì Ì Ì 5,000 Ì 41,250

Julian SoshnickÏÏÏÏÏÏÏÏÏÏÏ 5,000 $95,625 Ì Ì Ì Ì

(A) The value realized or the unrealized value of in-the-money options at year-end represents the aggregatediÅerence between the market value on the date of grant and, either the market value on the date ofexercise or, in the case of unrealized value, the market value at July 31, 2000.

(B) ""In-the-money'' options are options whose exercise price was less than the market price of CommonShare at July 31, 2000.

Compensation of Directors

Each director who is not an employee of the Company is entitled to an annual fee of $10,000 plus a fee of$1,000 per meeting for each of the Ñrst four meetings of the Board or any Board Committee attended by him,together with reimbursement of travel expenses under certain circumstances.

In February 1988, the Board of Directors adopted and stockholders approved at the January 1989 AnnualMeeting of Stockholders, the 1988 Non-QualiÑed Stock Option Plan for Non-Employee Directors (the ""1988Plan''). Pursuant to the 1988 Plan, options to purchase 50,000 shares of common stock may be granted only todirectors of the Company or any subsidiary who are not otherwise employees of the Company or anysubsidiary. The exercise price of options granted under the 1988 Plan is the fair market value of the CommonStock on the date of grant. The 1988 Plan provides that each Non-Employee director as of the date on whichthe Board of Directors adopted the 1988 Plan shall be granted an option to acquire 5,000 shares. Each newNon-Employee director who is subsequently elected to the Board of Directors shall be granted an option to

18

acquire 5,000 shares after one year of service. In June 1996 the Board of Directors amended the 1988 plan toincrease the number of options that could be granted to each Non-Employee director to 10,000 shares. As ofFebruary 1998, no additional options may be granted under the 1988 plan.

In June 1996, the Board of Director's adopted and stockholders approved at the January 1997 AnnualMeeting of Stockholders, the 1997 Non-QualiÑed Stock Option Plan for Non-Employee Directors (the ""1997Plan''). Pursuant to the 1997 Plan, options to purchase 50,000 shares of common stock may be granted only todirectors of the Company or any subsidiary who are not otherwise employees of the Company and anysubsidiary. The exercise price of options granted under the 1997 Plan is the fair market value of the CommonStock on the date of grant. The 1997 Plan provides each new Non-Employee Director who is elected to theBoard shall be granted an option to acquire 5,000 shares, eÅective as of the date he or she is Ñrst elected to theBoard; provided, however, that upon such Ñrst election, a new Non-Employee Director shall not receive agrant under both this Plan and the 1988 Plan.

The Board of Directors shall determine under which Plans grants shall be made. Every four (4) yearsfrom the date on which a Non-Employee Director was last granted a Non-Employee Director option, whetherunder either Plan, that Non-Employee Director shall be granted an option to acquire 5,000 shares, eÅective asof the date of that fourth anniversary.

Options granted under the both Plans are exercisable for a nine-year period commencing one year afterthe date of grant. During that exercise period, subject to the occurrence of certain events, options may beexercised only to the extent 33∏% of the number of shares covered by the option one or more years after thedate of grant, (b) 66π% of the number of shares subject to the option two or more years after the date ofgrant, and (c) 100% of the number of shares subject to the option three or more years after the date of grant.

The 1988 and 1997 Plans are administered by members of the Company's Board of Directors. There wereoptions granted pursuant to the 1997 Plan as of July 31, 2000.

The following tables set forth options granted pursuant to the 1988 and 1997 plans as of July 31, 2000:

Date of Options Option Options Options OptionsGrant Granted Price Exercised Exercisable Unexercisable

1988 Plan

Dr. WilsonÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2/01/88 5,000 $ 7.375 5,000 Ì Ì

Dr. WilsonÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6/12/96 5,000 27.750 Ì 5,000 Ì

Mr. Voboril ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6/12/91 5,000 10.875 5,000 Ì Ì

Mr. Voboril ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6/12/96 5,000 27.750 Ì 5,000 Ì

Dr. Steinhauer ÏÏÏÏÏÏÏÏÏÏÏÏ 10/08/93 5,000 14.750 5,000 Ì Ì

Dr. Steinhauer ÏÏÏÏÏÏÏÏÏÏÏÏ 6/12/96 5,000 27.750 Ì 5,000 Ì

1997 Plan

Mr. Brown 1/28/00 5,000 36.00 Ì Ì 5,000

Mr. Tarello ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1/28/00 5,000 36.00 Ì Ì 5,000

19

Item 12. Security Ownership of Certain BeneÑcial Owners and Management

(a) The following table sets forth information as to all persons (including any ""group'', as deÑned insection 13(d)(3) of the Exchange Act) known by the Company to have owned beneÑcially 5% or more of itsCommon Stock, $.05 par value, as of August 31, 2000:

Amount and Nature of PercentName and Address BeneÑcial Ownership Of Class

Bernard M. Gordon Charitable Remainder Unitrust ÏÏÏÏÏÏÏÏÏ 4,723,092 shares(1)(2) 36.7%(1)(2)Bernard M. GordonJulian SoshnickGerald P. Bonder, Trustees

8 Centennial DrivePeabody, MA 01960

T. Rowe PriceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,746,380 shares(3) 13.6%(3)100 East Pratt StreetBaltimore, MD 21202

Private Capital Management Inc.ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,069,859(3) 8.3%(3)3003 Ninth StreetNaples, FL 33940

(1) Exclusive of 6,000 shares owned by Mr. Gordon's wife, as to which he disclaims any beneÑcial interest.

(2) Mr. Gordon serves as Trustee of the Bernard Gordon Charitable Remainder Unitrust (the ""Trust'')along with Julian Soshnick and Gerald P. Bonder. The three Trustees, acting by a majority, have fullpower to vote or dispose of the shares held by the Trust. Upon the death of Mr. Gordon, all of the assetsof the Trust, in general, will be distributed to The Gordon Foundation, a Section 501(c)(3) trust formedby Mr. Gordon with its principal oÇce located at 8 Centennial Drive, Peabody, Massachusetts. The totalshares reported above include 12,900 shares owned by the Gordon Foundation.

(3) The Company has been advised informally by T. Rowe Price and Private Capital Management Inc. thatin their capacity as investment advisors they may be deemed a beneÑcial owner on August 31, 2000, of1,746,380 shares, or 13.6% of the Company's Common Stock and 1,069,859 shares, or 8.3% of theCompany's Common Stock, respectively.

(b) The following table sets forth information as to ownership of the Company's Common Stock, $.05par value, by its directors and by all directors and executive oÇcers as a group, as of August 31 2000:

Amount and Nature of PercentIdentity of Person BeneÑcial Ownership(1) Of Class

Bernard M. Gordon ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,723,092 shares(2)(3) 36.7%

Thomas J. Miller, Jr. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66,050 shares *

John A. TarelloÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,000 shares *

M. Ross BrownÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0 shares *

Gerald L. Wilson ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,000 shares(4) *

Edward F. Voboril ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,000 shares(4) *

Bruce W. Steinhauer ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,000 shares(4) *

All Directors and Executive Officers as a group (10 persons) ÏÏ 4,852,392 shares(4) 37.7%

* Represents less than 1% ownership

(1) The amounts shown are based upon information furnished by the individual directors and oÇcers. Unlessotherwise noted, the beneÑcial owners have sole voting and investment power with respect to the shareslisted.

(2) Exclusive of 6,000 shares owned by Mrs. Gordon, in which Mr. Gordon disclaims all beneÑcial interest.

(3) Mr. Gordon serves as Trustee of the Bernard Gordon Charitable Remainder Unitrust (the ""Trust'')along with Julian Soshnick and Gerald P. Bonder. The three Trustees, acting by a majority, have full

20

power to vote or dispose of the shares held by the Trust. Upon the death of Mr. Gordon, all of the assetsof the Trust, in general, will be distributed to the Gordon Foundation, a Section 501(c)(3) trust formedby Mr. Gordon with its principal oÇce located at 8 Centennial Drive, Peabody, Massachusetts.

The total shares reported above includes 12,900 shares owned by the Gordon Foundation.

(4) These amounts include certain shares deemed beneÑcially owned under Exchange ActRule 13d-3(d)(1).

Item 13. Certain Relationships and Related Transactions

(a) Mr. Bernard M. Gordon owns a 48% interest and Mr. Bernard L. Friedman, the Company's formerVice Chairman of the Board (Mr. Friedman resigned on July 31, 1993), owns a 52% interest in a limitedpartnership (Audubon Realty), which owns the Danvers, Massachusetts facilities leased by the Company fora term to July 31, 2001. These facilities include a 50,000 square foot building completed in 1978; a 40,000square foot addition to that building, completed in 1982; and an 80,000 square foot building which theCompany moved into during 1980. The Ñxed annual rent on the entire 170,000 square feet was increased from$1,164,000 to $1,219,000 eÅective March 1, 1998, and shall be adjusted as of March 1 every third year toreÖect increases in the cost of living. A total of 155,000 square feet of the facilities are sublet to SiemensMedical Electronics, Inc. under two subleases for terms which will end on December 1, 2000 and July 31,2001, respectively.

Mr. Gordon owns a 48% interest and Mr. Friedman owns a 52% interest in a limited partnership whichowns the facility located at 360 Audubon Road, WakeÑeld, Massachusetts, which is leased by the Companyfor a term to July 31, 2003. This facility has been utilized by the Company for manufacturing and oÇce spacesince May 1, 1981. The Ñxed annual rent for this facility was increased from $333,000 to $357,000 eÅectiveMay 1, 1999, and shall be adjusted as of May 1 every third year to reÖect increases in the cost of living.

All of the foregoing rents are on a net lease basis, and accordingly the Company pays, in addition to theabove rental payments, all taxes, maintenance, insurance, and other costs relating to the leased premises.

The terms of the several lease agreements, at the time they were executed, were at least as favorable asthose that could have been obtained from unaÇliated third parties. Prior to execution of each such lease, twoindependent appraisals were obtained in order to establish the fair market rate for subject premises. A rent, ineach case discounted below the fair market rate established by the appraisals, was then agreed upon by theparties.

The leases each incorporated periodic rent escalation clauses, based upon the CPI. At the present time,the rents that the Company is paying under the several leases reÖect fair rental value for the properties.

See Item 2 of this Report for information as to the character of the leased premises, and Note 7 of Notesto Consolidated Financial Statements for further information as to the leases.

(b) Certain Business Relationships:

None

(c) Indebtedness of Management:

None

(d) Transactions with Promoters:

None

22

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

PageNumber

(a) 1. Financial Statements

Report of Independent Accountants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24

Consolidated Balance Sheets at July 31, 2000 and 1999 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25

Consolidated Statements of Income for the years ended July 31, 2000, 1999 and 1998ÏÏÏÏ 26

Consolidated Statements of Stockholders' Equity for the years ended July 31, 2000, 1999and 1998 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27

Consolidated Statements of Cash Flows for the years ended July 31, 2000, 1999 and 1998ÏÏ 28

Notes to Consolidated Financial Statements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29-43

2. Financial Statement Schedule II. Ì Valuation and Qualifying Accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44

Other schedules have been omitted because they are not required, not applicable, or therequired information is furnished in the consolidated statements or notes thereto

3. Exhibits Ì See Index to Exhibits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 45-48

(b) Report on Form 8-K

No reports on Form 8-K were Ñled by the registrant during the quarter ended July 31,2000.

22

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theregistrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ANALOGIC CORPORATION

Date: October 19, 2000 By /s/ BERNARD M. GORDON

Bernard M. GordonChairman of the Board andChief Executive OÇcer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed belowby the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: October 19, 2000 /s/ BERNARD M. GORDON

Bernard M. GordonChairman of the Board,Chief Executive OÇcer and Director

Date: October 19, 2000 /s/ THOMAS J. MILLER, JR.

Thomas J. Miller, Jr.President, Chief Operating OÇcer and Director

Date: October 19, 2000 /s/ JOHN J. MILLERICK

John J. MillerickSenior Vice President,Chief Financial OÇcer and Treasurer

Date: October 19, 2000 /s/ JOHN A. TARELLO

John A. TarelloDirector

Date: October 19, 2000 /s/ M. ROSS BROWN

M. Ross BrownDirector

Date: October 19, 2000 /s/ BRUCE W. STEINHAUER

Bruce W. SteinhauerDirector

Date: October 19, 2000 /s/ EDWARD F. VOBORIL

Edward F. VoborilDirector

Date: October 19, 2000 /s/ GERALD L. WILSON

Gerald L. WilsonDirector

23

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors andStockholders of Analogic Corporation:

In our opinion, the consolidated Ñnancial statements listed in the index appearing under Item 14(a)(1)on page 22 present fairly, in all material respects, the Ñnancial position of Analogic Corporation and itssubsidiaries at July 31, 2000 and 1999, and the results of their operations and their cash Öows for each of thethree years in the period ended July 31, 2000, in conformity with accounting principles generally accepted inthe United States of America. In addition, in our opinion, the Ñnancial statement schedule listed in the indexappearing under Item 14(a)(2) on page 22, presents fairly, in all material respects, the information set forththerein when read in conjunction with the related consolidated Ñnancial statements. These Ñnancialstatements and Ñnancial statement schedule are the responsibility of the Company's management; ourresponsibility is to express an opinion on these Ñnancial statements and the Ñnancial statement schedule basedon our audits. We conducted our audits of these statements in accordance with auditing standards generallyaccepted in the United States of America, which require that we plan and perform the audit to obtainreasonable assurance about whether the Ñnancial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the Ñnancialstatements, assessing the accounting principles used and signiÑcant estimates made by management, andevaluating the overall Ñnancial statement presentation. We believe that our audits provide a reasonable basisfor our opinion.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLPBoston, MassachusettsSeptember 21, 2000

24

ANALOGIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

July 31,

2000 1999

(in thousands)

Assets

Current assets:

Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 29,132 $ 30,017

Marketable securities, at market (Note 3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 87,242 94,185

Accounts and notes receivable net of allowance for doubtful accounts ($1,010 in2000 and $1,123 in 1999)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 60,374 51,455

Accounts receivable aÇliates, net (Note 5)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,063 4,945

Inventories (Note 4)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 62,326 52,423

Deferred income taxes (Note 10) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,511 4,317

Other current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,239 3,128

Total current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 255,887 240,470

Property, plant and equipment, net (Note 4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 63,524 63,514

Investments in and advances to aÇliated companies (Note 6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,230 5,572

Capitalized software, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,368 4,174

Other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,567 1,283

Total Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $335,576 $315,013

Liabilities and Stockholders' Equity

Current liabilities:

Mortgage and other notes payable (Note 6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 363 $ 356

Obligations under capital leases (Note 7) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 714 633

Accounts payable, trade ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,015 14,526

Accrued expenses (Note 4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,038 19,015

Accrued income taxes (Note 10) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,780 68

Total current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42,910 34,598

Long term debt:

Mortgage and other notes payable (Note 6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,265 5,626

Obligations under capital leases (Note 7) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 374 1,088

5,639 6,714

Deferred income taxes (Note 10) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,086 1,497

Excess of acquired net assets over cost, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 104 217

Minority interest in subsidiary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,268 4,586

Commitments (Note 7)

Stockholders' equity

Common stock, $.05 par; authorized 30,000,000 shares; issued 13,980,502 shares in2000; 13,884,127 shares in 1999. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 699 694

Capital in excess of par value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,703 24,718

Retained earnings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 267,935 257,417

Accumulated other comprehensive income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,118) (1,023)

Treasury stock, at cost (1,102,135 shares in 2000, 1,169,070 shares in 1999) ÏÏÏÏÏÏÏÏ (11,869) (13,100)

Unearned compensation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,781) (1,305)

Total stockholders equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 279,569 267,401

Total Liabilities and Stockholders' Equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $335,576 $315,013

The accompanying notes are an integral part of these Ñnancial statements.

25

ANALOGIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years Ended July 31,

2000 1999 1998

(in thousands, except per share data)

Revenues:

Product and service, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $255,250 $242,853 $260,517

Engineering and licensingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,293 18,092 16,045

Other operating revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,038 12,015 12,036

Interest and dividend incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,038 6,734 5,874

Total revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 297,619 279,694 294,472

Cost of sales and expenses:

Cost of sales:

Product and serviceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 159,175 144,120 151,536

Engineering and licensingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,413 12,612 14,355

Other operating expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,203 6,098 6,091

General and administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,526 21,230 20,326

Selling ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26,207 25,735 25,814

Research and product development ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,260 39,598 36,177

Interest expense (Note 6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 301 364 508

Loss on foreign exchangeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 159 59 4

Amortization of excess of acquired net assets over costÏÏÏÏÏÏÏÏÏÏ (113) (113) (335)

Total cost of sales and expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 275,131 249,703 254,476

Income from operations and interest and dividend income 22,488 29,991 39,996

Gain on sale of marketable securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 997

Equity in loss of unconsolidated aÇliatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,225) (4,657) (3,616)

Loss on investment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (110) (400)

Income before income taxes and minority interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,153 25,334 36,977

Provision for income taxes (Note 10) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,558 5,063 11,991

Minority interest in net income of consolidated

Subsidiary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 487 758 1,098

Net Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 14,108 $ 19,513 $ 23,888

Earnings per share (Note 14):

BasicÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1.10 $ 1.54 $ 1.89

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1.10 $ 1.53 $ 1.87

The accompanying notes are an integral part of these Ñnancial statements.

26

27

ANALOGIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYYEARS ENDED JULY 31, 2000, 1999 AND 1998

AccumulatedCapital in Other Total

Common Stock Treasury StockExcess of Unearned Retained Comprehensive Stockholders'Shares Amount Par value Shares Amount Compensation Earnings Income Equity

(000 omitted, except share data)

Balance, July 31, 1997 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,835,364 $692 $22,916 (1,234,653) $(14,121) $(1,710) $220,343 $ 96 $228,216Shares issued for employee stock options, grants, and stock purchase

plan, net of cancellations and income tax beneÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,763 1 442 29,306 606 70 1,119 Amortization of unearned compensation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 538 538 Dividends paid ($0.23 per share) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,902) (2,902) Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 209 209 Comprehensive Income:

Net income for the yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,888 23,888Translation adjustments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 244 244Unrealized holding gains and losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (57) (57)

Comprehensive Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,075

Balance, July 31, 1998 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,852,127 $693 $23,567 (1,205,347) $(13,515) $(1,102) $241,329 $ 283 $251,255

Shares issued for employee stock options, grants, and stock purchaseplan, net of cancellations and income tax beneÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,000 1 1,043 52,277 964 (730) 1,278

Purchases of treasury stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (16,000) (549) (549) Amortization of unearned compensation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 527 527 Dividends paid ($0.27 per share) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,425) (3,425) Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 108 108 Comprehensive Income:

Net income for the yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,513 19,513

Translation adjustments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (250) (250)Unrealized holding gains and losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,056) (1,056)

Comprehensive Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,207

Balance, July 31, 1999 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,884,127 $694 $24,718 (1,169,070) $(13,100) $(1,305) $257,417 $(1,023) $267,401

Shares issued for employee stock options, grants, and stock purchaseplan, net of cancellations and income tax beneÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 96,375 5 2,915 66,935 1,231 (2,120) 2,031

Amortization of unearned compensation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 644 644 Dividends paid ($0.28 per share) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,590) (3,590) Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 70 70Comprehensive Income:

Net income for the yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,108 14,108Translation adjustments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (309) (309)Net of tax of $1,265Unrealized holding gains and losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (786) (786)Net of tax of $122

Comprehensive Income:ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,013

Balance, July 31, 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,980,502 $699 $27,703 (1,102,135) $(11,869) $(2,781) $267,935 $(2,118) $279,569

The accompanying notes are an integral part of these Ñnancial statements.

ANALOGIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

Years Ended July 31,

2000 1999 1998

(in thousands)

OPERATING ACTIVITIES:

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 14,108 $ 19,513 $ 23,888

Adjustments to reconcile net income to net cash provided byoperating activities:

Deferred income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,605) (2,563) 465

Depreciation and amortizationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,787 13,525 10,315

Minority interest in net income of consolidated subsidiaries ÏÏÏÏÏÏ 487 758 1,098

Allowance for doubtful accountsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (113) 367 1,273

Gain on sale of marketable securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (997)

Gain on sale of equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (106) (59) (25)

Excess of equity in loss of unconsolidated aÇliates ÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,226 4,657 3,616

Impairment on investmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 110 400

Compensation from stock grants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 644 526 538

Net changes in operating assets and liabilities (Note 13) ÏÏÏÏÏÏÏÏ (13,278) 294 (12,978)

NET CASH PROVIDED BY OPERATING ACTIVITIES ÏÏÏÏÏÏ 14,260 37,018 27,593

INVESTING ACTIVITIES:

Investments in an advances to aÇliated companies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,068) (3,980) (3,340)

Additions to property, plant and equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (12,998) (20,655) (14,598)

Capitalized software ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,972) (2,462) (1,658)

Proceeds from sale of property, plant and equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 973 116 49

Purchases of marketable securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8,805) (11,205) (29,770)

Maturities of marketable securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,840 10,120 25,053

Proceeds from sale of marketable securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 997

NET CASH USED BY INVESTING ACTIVITIES ÏÏÏÏÏÏÏÏÏÏÏÏ (12,030) (28,066) (23,267)

FINANCING ACTIVITIES:

Proceeds from (payment of) overdraft facility ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,600) 2,600

Payments on debt and capital lease obligationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (987) (911) (841)

Purchase of common stock for treasury ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (549)

Issuance of common stock pursuant to stock options and employeestock purchase planÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,771 1,156 863

Dividends paid to shareholders ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,590) (3,425) (2,902)

Purchase of minority interestÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,600)

NET CASH USED BY FINANCING ACTIVITIES ÏÏÏÏÏÏÏÏÏÏÏ (2,806) (6,329) (1,880)

EFFECT OF EXCHANGE RATE CHANGES ON CASH ÏÏÏÏÏÏ (309) (250) 244

NET INCREASE (DECREASE) IN CASH AND CASHEQUIVALENTS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (885) 2,373 2,690

CASH AND CASH EQUIVALENTS, BEGINNING OFYEAR ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,017 27,644 24,954

CASH AND CASH EQUIVALENTS, END OF YEARÏÏÏÏÏÏÏÏÏ $ 29,132 $ 30,017 $ 27,644

The accompanying notes are an integral part of these Ñnancial statements.

28

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of business operations and signiÑcant accounting policies:

Business operations:

The Company's operations consist of the design, manufacture and sale of high technology, highperformance, high-precision data acquisition, conversion (analog/digital) and signal processing instrumentsand systems to customers that manufacture products for medical and industrial use. The Company is subjectto risks common to companies in the medical instrumentation technology industry, including, but not limitedto, development by its competitors of new technological innovations, dependence on key personnel, loss of anysigniÑcant OEM customer, protection of proprietary technology, and compliance with regulations of domesticand foreign regulatory authorities and agencies.

Product, service, engineering and licensing export revenue, primarily from customers in Europe and Asia,amounted to approximately $93,911,000 or 34%, $95,504,000 or 37%, and $92,292,000 or 33% of total product,service, engineering and licensing revenue for the years ended July 31, 2000, 1999 and 1998, respectively.

SigniÑcant accounting policies are as follows:

(a) Principles of consolidation:

The consolidated Ñnancial statements include the accounts of the Company and all wholly owned andmajority-owned subsidiaries. Investments in companies in which ownership interests range from 20 to50 percent and the Company exercises signiÑcant inÖuence over operating and Ñnancial policies are accountedfor using the equity method. Other investments are accounted for using the cost method. All signiÑcantintercompany accounts and transactions have been eliminated.

(b) Inventories:

Inventories are stated at the lower of cost or market. Costs are determined using standard cost whichapproximates the Ñrst-in, Ñrst-out (FIFO) method.

(c) Property, plant and equipment:

Fixed assets are recorded at cost. Provisions for depreciation are based on their estimated useful livesusing the straight-line method. Leasehold improvements are depreciated over the shorter of the remainder ofthe lease's term or the life of the improvements. Upon retirement or disposal, the cost of the asset disposed ofand the related accumulated depreciation are removed from the accounts and any gain or loss is reÖected inincome.

The annual provisions for depreciation and amortization have been computed in accordance with thefollowing ranges of estimated useful lives:

Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35 years

Property under capital lease ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14 to 23 years

Manufacturing equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 to 7 years

Furniture, Ñxtures and computer equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 to 8 years

Leasehold and capital lease improvements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 to 15 years

Motor vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 years

(d) Revenue recognition:

Revenue from product sales is recognized at shipment provided that no signiÑcant obligations remainoutstanding and the resulting receivable is deemed collectible by management. Service revenues arerecognized at the time the services are rendered and the Company has no signiÑcant further obligations to the

29

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

customer. For certain transactions, at the request of the customer, revenue is recognized on a bill and holdbasis after completion of manufacture. All bill and hold transactions meet speciÑed revenue recognitioncriteria which include normal billing, credit and payment terms, Ñrm commitment and transfer to thecustomers of all risks and rewards of ownership. Total revenue related to bill and hold transactions wereapproximately $1,806,000, $2,049,000 and $668,000 for the years ended July 31, 2000,1999, and 1998respectively.

(e) Capitalized software costs:

The Company capitalizes certain computer software costs, after technological feasibility has beenestablished, which are amortized utilizing the straight-line method over the economic lives of the relatedproducts not to exceed three years. Accumulated amortization approximated $18,883,000 and $17,104,000 atJuly 31, 2000 and 1999, respectively.

(f) Warranty costs:

The Company provides for estimated warranty costs as products are shipped.

(g) Research and product development costs:

Research and product development costs are expensed as incurred.

(h) Income taxes:

The Company accounts for income taxes under the liability method, which requires recognition ofdeferred tax assets, subject to valuation allowances, and liabilities for the expected future tax consequences ofevents that have been included in the Ñnancial statements or tax returns. Deferred income taxes reÖect the nettax eÅects of temporary diÅerences between the carrying amounts of asset and liabilities for Ñnancial reportingand income tax purposes. A valuation allowance is established if it is more likely than not that all or a portionof the net deferred tax assets will not be realized.

(i) Earnings per share:

Basic per-share earnings are based upon the weighted average common shares outstanding during theyear. Diluted per-share earnings are based upon the weighted average common shares and potential newshares from stock options. The number of shares utilized in the basic per-share computations were 12,817,129,12,683,326 and 12,614,303 in Ñscal 2000, 1999 and 1998. The number of shares utilized in the diluted per-share computations are 12,883,063, 12,790,836 and 12,793,027 in Ñscal 2000, 1999, and 1998 respectively.

(j) Cash and cash equivalents:

The Company considers all short-term deposits with an original maturity of three months or less atacquisition date to be cash equivalents. Cash equivalents amounted to approximately $26,372,000 and$29,258,000 at July 31, 2000 and 1999, respectively.

(k) Concentration of credit risk:

The Company grants credit to domestic and foreign original equipment manufacturers, distributors andend users. The Company places its cash investments in high credit quality Ñnancial instruments and, by policy,limits the amount of credit exposure to any one Ñnancial institution.

30

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

(l) Marketable securities:

The Company's marketable securities are categorized as available-for-sale securities, as deÑned by theStatement of Financial Accounting Standards No. 115, ""Accounting for Certain Investments in Debt andEquity Securities.'' Unrealized holding gains and losses are reÖected as a net amount in a separate componentof stockholders' equity until realized. For the purpose of computing realized gains and losses cost is identiÑedon a speciÑc identiÑcation basis.

(m) Accounting Standards

In June 1998, the Financial Accounting Standards Board, (""FASB'') issued Statement of FinancialAccounting Standards (SFAS No. 133), ""Accounting for Derivative Instruments and Hedging Activities.''The standard established accounting and reporting standards requiring the recognition of all derivativeinstruments as either assets or liabilities in the statement of Ñnancial position and the measure of thoseinstruments at fair value. In June 1999, the FASB issued SFAS No. 137, which defers the eÅective date ofSFAS No. 133 to Ñscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138,which amends certain derivative instruments and certain hedging activities in SFAS No. 133. Because thecompany does not currently hold any derivative instruments and does not currently engage in hedgingactivities, we expect the adoption of SFAS No. 133 and SFAS No. 138 will not have a material impact on ourÑnancial position or operating results.

In December 1999, the Securities and Exchange Commission issued StaÅ Accounting Bulletin No. 101(""SAB 101'') ""Revenue Recognition in Financial Statements,'' as amended by SAB 101A and SABNo. 101B (""SAB101''), which is eÅective no later than the quarter ending July 31, 2001. SAB 101 clariÑesthe Securities and Exchange Commission's views regarding the recognition of revenue. The Company willadopt SAB 101 in the fourth quarter of 2001. The Company is currently evaluating the impact SAB 101 willhave on the Company's Ñnancial position and results of operations.

In March 2000, the Financial Accounting Standards Board issued Interpretation No. 44, ""Accounting forCertain Transactions Involving Stock Compensation Ì an interpretation of Accounting Principles Board(APB) Opinion No. 25'' (FIN 44). FIN 44 clariÑes the application of APB Opinion No. 25 including: thedeÑnition of an employee for purposes of applying APB Opinion No. 25, the criteria for determining whether aplan qualiÑes as a non-compensatory plan, the accounting consequence of various modiÑcations to the termsof previously Ñxed stock options or awards, and the accounting for an exchange of stock compensation awardsin a business combination. FIN 44 is eÅective July 1, 2000, but certain conclusions in FIN 44 cover speciÑcevents that occurred after either December 15, 1998 or January 12, 2000. The Company does not expect theapplication of FIN 44 to have a material impact on its result of operations or Ñnancial position.

(n) Use of estimates

The preparation of Ñnancial statements in conformity with generally accepted accounting principlesrequires management to make estimates and assumptions that aÅect the reported amounts of assets andliabilities and disclosures of contingent assets and liabilities at the date of the Ñnancial statements and thereported amounts of expenses during the reporting periods. Actual results could diÅer from those estimates.

(o) Comprehensive income

Statement of Financial Accounting Standards No. 130, (""SFAS 130''), ""Reporting ComprehensiveIncome'' establishes new rules for reporting and display of comprehensive income and its components.Components of comprehensive income include net income and certain transactions that have generally beenreported in the consolidated statements of shareholders' equity. Other comprehensive income consists of netincome, unrealized gains and losses on investments and foreign currency translation adjustments.

31

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

(p) Stock-based compensation:

Statement of Financial Accounting Standards No. 123, (""SFAS 123''), ""Accounting for Stock-basedCompensation'' encourages, but does not require, recognition of compensation expense based on the fair valueof employee stock-based compensation instruments. The Company has not adopted the fair value method ofaccounting for employee stock-based compensation, but instead complies with the pro forma disclosurerequirements.

(q) Fair value of Ñnancial instruments:

The carrying amounts of cash, cash equivalents, receivables, mortgages and other notes payableapproximate fair value. The Company believes similar terms for mortgage and other notes payable would beattainable. The fair values of marketable securities are estimated based on quoted market price for thesesecurities.

(r) Impairment of Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets, primarily Ñxed assets, in accordancewith Statement of Financial Accounting Standards No. 121, (SFAS 121), ""Accounting for the Impairment ofLong-Lived Assets to be Disposed of''. SFAS 121 requires recognition of impairment of long-lived assets inthe event the net book value of such assets exceeds the estimated future undiscounted cash Öows attributableto such assets. No impairments were required to be recognized during the years ended July 31, 2000, 1999 and1998.

(s) Basis of presentation:

Certain Ñnancial statement items have been reclassiÑed to conform to the current year's format.

2. Business combinations:

The Company's subsidiary, Camtronics, entered into an agreement with the three founding stockholders(""Founders'') two of whom remain active employees of Camtronics. The agreement requires Camtronics topurchase up to 5% of the shares of Camtronics common stock originally issued to the Founders at their optionduring each Ñscal year beginning in 1992 pursuant to a predetermined formula. If a Founder does not exercisehis right to cause Camtronics to purchase his outstanding shares, such rights shall not lapse, but shall becumulative and may be exercised hereafter. At July 31, 2000 the Founders' remaining shares when valued atthe predetermined formula price have a total value of $2.8 million. The Company's ownership of Camtronicsincreased from approximately 65% in Ñscal 1992 to approximately 81% in Ñscal 2000, as a result of one of theFounders selling his entire equity interest in Camtronics to the Company for $1,600,000, and the otherFounders exercising their rights to sell 5% of their shares during this period. The carrying value of theCompany's total investment in Camtronics exceeded its portion of underlying equity in net assets byapproximately $1,453,000 which has been fully amortized.

As of January 1, 1993, the Company acquired an interest of approximately 57% in a newly formedcompany, B-K Medical Systems A/S (""B-K''), for $3,607,000 in cash and a subordinated interest free short-term loan of $3,500,000, which was converted into equity on July 31, 1993. The Company's ownership interestwas adjusted upward to 59% in Ñscal 1994 in accordance with the shareholders' agreement. B-K, a DanishCorporation, is primarily engaged in the design and manufacture of ultrasound imaging devices used inurology and various sonographic techniques. The acquisition was accounted for as a purchase and B-K'soperations have been included in the Company's consolidated Ñnancial statements since January 1, 1993. TheCompany's equity in net assets of B-K exceeded the purchase price by approximately $2,662,000, and wasfully amortized by July 31, 1998. As of July 1, 1996, the Company acquired the remaining 41% interest in B-K

32

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

for $3,416,000 in cash. The Company's equity in net assets of B-K exceeded the purchase price for this portionof the investment by approximately $565,000. This excess is being amortized over a Ñve-year period beginningJuly 1, 1996. Accumulated amortization amounted to $462,000 and $349,000 as of July 31, 2000 and 1999,respectively.

On June 28, 1999, the Company acquired the Ñxed assets of Noranda Advanced Materials' medicaldetectors and pure metal businesses for approximately $5.5 million. The company was renamed ANRAD andis located in St. Laurent, Quebec. ANRAD's objective is to develop and manufacture selenium-based Öatpanel x-ray detectors for the medical and industrial markets. The acquisition was accounted for as a purchaseand ANRAD operations have been included in the Company's consolidated Ñnancial statements sinceJune 28, 1999. During the fourth quarter of Ñscal 2000, ANRAD sold the assets of its pure metal business atcost for approximately $700,000 in cash to former employees. No gain or loss was recognized by the Companyin connection with the sale.

3. Marketable securities:

Marketable securities are categorized as available-for-sale securities and summarized as follows:

Gross Unrealized

July 31, 2000 Cost Fair Value Gain Loss

Debt securities issued by various state andlocal municipalities and agencies ÏÏÏÏÏÏÏÏÏ $87,550,000 $87,242,000 $384,000 $(692,000)

July 31, 1999

Debt securities issued by various state andlocal municipalities and agencies ÏÏÏÏÏÏÏÏÏ $93,585,000 $94,185,000 $901,000 $(301,000)

Contractual maturities range from one to seven years, with the majority Ñve years or less.

33

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

4. Balance Sheet Information

Additional information for certain balance sheet accounts is as follows for the years ended:

July 31,

2000 1999

(in thousands)

Inventories:

Raw materialsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 31,728 $ 20,918

Work-in-process ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,724 20,621

Finished goods ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,874 10,884

$ 62,326 $ 52,423

Property, plant and equipment:

Land and land improvements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4,253 $ 4,252

Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37,531 37,209

Property under capital lease ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,865 6,251

Leasehold and capital lease improvements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,464 5,201

Manufacturing equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 90,621 84,770

Furniture, Ñxtures and computer equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,118 30,770

Motor vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 834 1,136

173,686 169,589

Less accumulated depreciation and amortizationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (110,162) (106,075)

$ 63,524 $ 63,514

Accrued expenses:

Accrued employee compensation and beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 10,562 $ 10,349

Accrued warrantyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,636 3,840

Accrued expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,840 4,826

$ 20,038 $ 19,015

5. Investments in and advances to aÇliated companies:

The Company owns 50% of Analogic ScientiÑc, Inc. (""ScientiÑc''), a joint venture corporation withKejian Corporation of The People's Republic of China. The Company's original investment of $1,500,000 hasbeen accounted for using the equity method of accounting. The Company's share of ScientiÑc's proÑtamounted to $925,000 in Ñscal year 2000. The Company did not record any income or loss associated with thisinvestment in Ñscal 1999. The carrying value of this investment was $6,125,000 at July 31, 2000 and$5,200,000 and July 31, 1999. Transactions with ScientiÑc for Ñscal years 2000, 1999 and 1998 consisted ofrevenues of approximately $5,575,000, $2,610,000 and $1,116,000, respectively. At July 31, 2000 and 1999, netaccounts receivable from this aÇliate were $3,063,000, and $1,884,000, respectively.

During Ñscal 2000, the Company made an additional investment of $3,068,000 ($3,950,000 in Ñscal1999) in a privately held company, which funded research and development for the design and manufacture ofmedical imaging equipment. Since Ñscal 1996, the Company has made a cumulative investment of$13,698,000 in return for a 50% equity position in the privately held company. During Ñscal 2000 and 1999,transactions with this privately held company consisted of revenues of $3,559,000 and $10,177,000,respectively.

34

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

Upon completion of the research and development phase, the private company sold its intellectualproperty to a new company in the form of a license; distributed its assets to the Company and the otheroriginal investor; and ceased operations. The Company, in conjunction with its original investor, retains a 50%interest in the new company, which will receive license related royalties based upon future sales of medicalimaging equipment.

In Ñscal 2000, the Company received a Ñnal distribution of 1,771,802 shares of restricted securities in apublicly traded company from the limited partnership. The restriction on 620,865 shares will be withdrawn onJanuary 1, 2001 and on the balance of 1,150,937 shares on March 29, 2001. At July 31, 2000 the Companyrecognized a loss of approximately $110,000 on the value of these shares. During Ñscal 1998, the Companyreceived a distribution of stock from this limited partnership, which was sold for a gain of $997,000. TheCompany's investment in a limited partnership is accounted for using the cost method, as the Company is alimited partner, and accordingly, has no inÖuence over the partnership. The carrying value of this investmentat July 31, 2000 is $664,000.

6. Mortgage and other notes payable:

Mortgage and other notes payable consists of the following:

July 31,

2000 1999

3% mortgage note payable, due 2017, payable quarterly, collateralizedby land, oÇce and manufacturing facilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $4,728,000 $4,932,000

Business Development Revenue Bonds, interest of approximately 5%payable quarterly, annual principal payments of $150,000 throughSeptember 1, 2005, collateralized by land, oÇce and manufacturingfacilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 900,000 1,050,000

5,628,000 5,982,000

Less current portionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 363,000 356,000

$5,265,000 $5,626,000

Principal maturities in each of the next Ñve Ñscal years on the above notes are as follows: 2001, $363,000;2002, $369,000; 2003, $376,000; 2004, $383,000; 2005, $390,000.

Total interest incurred amounted to $472,000, $518,000, and $659,000, in 2000, 1999, and 1998,respectively, of which $171,000 in 2000, $154,000 in 1999, and $151,000 in 1998 was capitalized.

7. Lease commitments with related and non-related third parties:

The Company leases three operating facilities from a partnership in which the Chairman and the formerVice Chairman are partners under leases that have been accounted for as capital leases. Certain leases containcontingent rentals based upon cost-of-living adjustments. Contingent rentals were not signiÑcant in 2000, 1999and 1998.

Property under capital leases is included in property, plant and equipment, as follows:

July 31,

2000 1999

Land and Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $4,865,000 $6,251,000

Less accumulated amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,485,000 5,636,000

Net capital lease assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 380,000 $ 615,000

35

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

Certain of the Company's subsidiaries lease manufacturing and oÇce space under non-cancelableoperating leases. These leases contain renewal options. The Company leases certain other real property andequipment under operating leases which, in the aggregate, are not signiÑcant.

Rent expense approximated $989,000, $764,000, and $513,000 (net of sublease income of $1,143,000,$1,108,000, and $1,144,000) in Ñscal 2000, 1999 and 1998, respectively.

The following is a schedule by year of future minimum lease payments at July 31, 2000:

Capital OperatingFiscal Year Leases Leases

2001ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 812,000 $1,397,000

2002ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 213,000 848,000

2003ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 213,000 493,000

2004ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 421,000

2005ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 616,000

$1,238,000 $3,775,000

Less amount representing interest,At 9.5% Ó 17.6% ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 150,000

Present value of minimum lease payments (includes current portion of$714,000) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,088,000

Future minimum lease payments under capital leases have not been reduced for sublease rental income ofapproximately $1,143,000.

8. Stock option and stock bonus plans:

At July 31, 2000, the Company had four key employee stock option plans; two of which have lapsed as tothe granting of options. In addition, the Company has one key employee stock bonus plan, two non-employeedirector stock option plans (one of which has lapsed as to the granting of options), and one employee stockpurchase plan.

Options granted under the four key employee stock option plans become exercisable in installmentscommencing no earlier than three years from the date of grant and no later than seven years from the date ofgrant. Unexercised options expire eight years from date of grant. Options issued under the plans are non-qualiÑed options or incentive stock options and are issued at prices of not less than 100% of the fair marketvalue at the date of grant. Tax beneÑts from early disposition of the stock by optionees under incentive stockoptions, and from exercise of non-qualiÑed options are credited to capital in excess of par value.

Options granted under two non-employee director stock option plans become exercisable in installmentscommencing one year from the date of grant and remain exercisable for ten years from the date of grant.Options issued under the plans are non qualiÑed options and are issued at prices of 100% of the fair marketvalue at the date of grant.

Under the Company's key employee stock bonus plan, common stock may be granted to key employeesunder terms and conditions as determined by the Board of Directors. Generally, participants under the stockbonus plan may not dispose or otherwise transfer stock granted for three years from date of grant. Uponissuance of stock under the plan, unearned compensation equivalent to the market value at the date of grant ischarged to stockholders' equity and subsequently amortized over the periods during which the restrictionslapse (up to six years). Shares granted under the Company's key employee stock bonus plan were 87,000 at aweighted average fair market value of $2,426,000 in Ñscal 2000; 22,000 shares at a weighted average fairmarket value of $736,000 in Ñscal 1999; and 3000 shares at a weighted average fair market value of $109,000

36

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

in Ñscal 1998. Amortization of unearned compensation of $644,000, $527,000, and $538,000 was recorded inÑscal 2000, 1999, and 1998, respectively.

Under the employee stock purchase plan, participants are granted options to purchase the Company'scommon stock twice a year at the lower of 85% of market value at the beginning or end of each period.Calculation of the number of options granted, and subsequent purchase of these shares, is based uponvoluntary payroll deductions during each six-month period. The number of options granted to each employeeunder this plan, when combined with options issued under other plans, is limited to a maximum outstandingfair market value of $25,000 during each calendar year. The number of shares issued pursuant to this plantotaled 11,940 in 2000, 12,389 in 1999, and 6,007 in 1998.

At July 31, 2000, 1,033,384 shares were reserved for grant under the above stock option, bonus andpurchase plans.

The following table sets forth the stock option transactions for the years ended July 31, 2000, 1999, and1998:

2000 1999 1998

Weighted Weighted WeightedAverage Number Average Number Average NumberPrice per Of Price per Of Price per Of

Share Shares Share Shares Share Shares

Options outstanding, beginning of year ÏÏÏÏÏÏÏÏ $29.80 511,389 $27.25 477,752 $22.41 460,814

Options granted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35.48 134,850 35.17 121,400 39.18 125,225

Options exercisedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18.32 (73,370) 15.96 (49,888) 14.39 (47,062)

Options cancelledÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 33.42 (73,788) 33.06 (37,875) 25.08 (61,225)

Options outstanding end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏ 32.44 499,081 29.80 511,389 27.25 477,752

Options exercisable, end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏ 23.59 88,813 19.87 111,656 17.06 91,739

The following table summarizes information about stock options outstanding at July 31, 2000:

Options Outstanding Options Exercisable

Weighted-AvgNumber Remaining Weighted-Avg Number Weighted-Avg

Range of Outstanding Contractual Exercise Exercisable ExerciseExercise Prices As of 7/31/00 Life (years) Price As of 7/31/00 Price

$14.88 Ó $27.75 128,405 3.48 $23.31 78,286 $22.62

27.76 Ó 36.00 176,701 6.32 32.49 10,527 30.82

36.01 Ó 37.75 152,125 6.50 37.19 0 0

37.76 Ó 44.00 41,850 6.11 42.93 0 0

$14.88 Ó $44.00 499,081 5.63 $32.44 88,813 $23.59

The fair value method of the Company's stock options was estimated using the Black-Scholes option-pricing model. This model was developed for use in estimating fair value of traded options that have no vestingrestrictions and are fully transferable. This model requires the input of highly subjective assumptions includingthe expected stock price volatility. Because the Company's stock options have characteristics signiÑcantlydiÅerent from those of traded options, and because changes in the subjective input assumptions can materiallyaÅect the fair value estimate, in management's opinion, the existing model does not necessarily provide a

37

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

reliable single measure of the fair value of its stock options. The fair value of the Company's stock options wasestimated using the following weighted-average assumptions:

2000 1999 1998

Expected life (in years) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 7 8

Volatility ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41% 38% 38%

Risk-free interest rateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.45% 4.89% 5.78%

Dividend yield ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ .6% .8% .6%

The weighted-average estimated fair value of stock options granted during Ñscal 2000, 1999 and 1998,was $19.07, $19.13 and $19.71 per share, respectively. For pro forma purposes, the estimated fair value of theCompany's stock options is amortized over the options' vesting period. The Company's pro forma informationis as follows:

Years Ended July 31,

2000 1999 1998

(in thousands, except per share amounts)

Net income

As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $14,108 $19,513 $23,888

Pro formaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,609 18,987 23,521

Net income per share

As reported Ì Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.10 1.54 1.89

Pro forma Ì Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.06 1.50 1.86

As reported Ì Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.10 1.53 1.87

Pro forma Ì Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.06 1.48 1.84

9. ProÑt sharing retirement plan:

The Company has a qualiÑed ProÑt Sharing Retirement Plan for the beneÑt of eligible employees. Theplan provides that the Company shall make contributions from current or accumulated earnings as determinedby the Board of Directors. The contribution each year shall in no event exceed the maximum allowable underapplicable provisions of the Internal Revenue Code. ProÑt sharing expense amounted to $1,000,000 in each ofÑscal years 2000, 1999 and 1998.

The Company has 401(K) plans under which employees can contribute up to 15% of their annual baseincome, not to exceed the maximum amount allowable under the Internal Revenue Code in any one calendaryear.

38

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

10. Income taxes:

The components of the provision for income taxes are as follows:

July 31

2000 1999 1998

Current income taxes:

Federal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 5,737,000 $ 6,743,000 $ 8,606,000

State and foreign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,038,000 883,000 2,920,000

7,775,000 7,626,000 11,526,000

Deferred income taxes (beneÑt):

Federal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,254,000) (2,110,000) 67,000

State and foreign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37,000 (453,000) 398,000

(1,217,000) (2,563,000) 465,000

$ 6,558,000 $ 5,063,000 $11,991,000

The tax eÅects of the principal temporary diÅerences resulting in deferred tax expense (beneÑt) are asfollows:

July 31,

2000 1999 1998

Unrealized equity gain/lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (45,000) $(1,930,000) $1,036,000

Capitalized softwareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 507,000 75,000 (411,000)

Depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (51,000) 197,000 436,000

Bad debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,175,000) 16,000 (25,000)

Inventory valuation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (376,000) (876,000) (219,000)

BeneÑt plans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (151,000) (202,000) 49,000

Net capital and operating loss carryforwards ÏÏÏÏÏÏÏÏÏÏ (140,000) 145,000 85,000

Other items, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 214,000 12,000 (486,000)

$(1,217,000) $(2,563,000) $ 465,000

Income (loss) before income taxes from domestic and foreign operations is as follows:

July 31,

2000 1999 1998

DomesticÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $18,348,000 $26,397,000 $32,833,000

Foreign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,805,000 (1,063,000) 4,144,000

$21,153,000 $25,334,000 $36,977,000

39

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

The components of the deferred tax assets and liabilities are as follows:Deferred Tax Deferred Tax

July 31, 2000 Assets Liabilities

Depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ Ì $4,057,000

Bad debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,364,000

Capitalized interest and other costsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 455,000 419,000

InventoryÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,872,000

WarrantyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,010,000

BeneÑt plansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,650,000

Lease transactions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 287,000

Unrealized equity gain/loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,075,000 3,355,000

Capitalized software ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,554,000

Net capital loss carry forwardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 780,000

Comprehensive IncomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,387,000

MiscellaneousÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 930,000

$14,810,000 $9,385,000

Deferred Tax Deferred TaxJuly 31, 1999 Assets Liabilities

Depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ Ì $4,109,000

Bad debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 190,000

Capitalized interest and other costsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 558,000 430,000

InventoryÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,496,000

WarrantyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,027,000

BeneÑt plansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,499,000

Lease transactions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 444,000

Unrealized equity gain/loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,368,000 2,692,000

Capitalized software ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,048,000

Net capital loss carry forwardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 640,000

MiscellaneousÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 877,000

$11,099,000 $8,279,000

A reconciliation of income taxes at the United States statutory rate to the eÅective tax rate follows:

Year Ended July 31,

2000 1999 1998

U.S. federal statutory tax rateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35% 35% 35%

Foreign sales corporation tax beneÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3) (3) (2)

State income taxes, net of federal tax beneÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 1 2

Tax exempt interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7) (6) (4)

Prior year tax provision ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2)

General business credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1) (2) (1)

Net losses of subsidiaries not taxed ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3

Other items, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 (3) 2

EÅective tax rateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31% 20% 32%

Two of the Company's subsidiaries have elected to be taxed as Foreign Sales Corporation (FSC).

40

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

11. Quarterly results of operations (unaudited):

The following is a summary of unaudited quarterly results of operations for the years ended July 31, 2000and 1999.

Basic DilutedTotal Net Earnings Earnings

Revenues Income Per share Per share

2000 Quarters

First ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 65,438,000 $ 2,518,000 $ .20 $ .20

SecondÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66,473,000 1,188,000 .09 .09

Third ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 76,540,000 4,997,000 .39 .39

Fourth ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 89,168,000 5,405,000 .42 .42

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $297,619,000 $14,108,000 $1.10 $1.10

1999 Quarters

First ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 67,166,000 $ 4,757,000 $ .38 $ .37

SecondÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 72,689,000 5,565,000 .44 .44

Third ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 70,862,000 5,330,000 .42 .42

Fourth ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 68,977,000 3,861,000 .30 .30

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $279,694,000 $19,513,000 $1.54 $1.53

12. Transactions with major customers and industries:

One export customer accounted for approximately $44,000,000 and $47,000,000 or 16% and 18% of totalproduct, service, engineering and licensing revenue in Ñscal 2000 and 1999, respectively. Of the total product,service, engineering and licensing revenue, one domestic customer accounted for approximately $28,000,000or 10% and $20,000,000 or 8% in Ñscal 2000 and 1999, respectively.

The Company's ten largest customers accounted for approximately 60% of product, service, engineering,and licensing revenue during Ñscal 2000.

Medical Technology Products, consisting primarily of electronic systems and subsystems for medicalimaging equipment, accounted for approximately 73% of product, service, engineering, and licensing revenuein Ñscal 2000.

41

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

13. Supplemental disclosure of cash Öow information:

Changes in operating assets and liabilities are as follows for the years ended:

July 31,

2000 1999 1998

(in thousands)

Accounts and notes receivableÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (8,806) $ 258 $ (2,632)

Accounts receivable from aÇliates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,882 (2,386) (649)

Inventories ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (9,903) 2,493 (7,116)

Other current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,111) (471) (512)

Other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,284) (255) (52)

Accounts payable trade ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,489 2,909 (1,567)

Accrued expenses and other current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏ 483 (1,126) 1,425

Accrued income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,972 (1,128) (1,875)

Net changes in operating assets and liabilities ÏÏÏÏÏÏÏÏÏÏÏÏ $(13,278) $ 294 $(12,978)

During Ñscal years 2000, 1999 and 1998, interest paid amounted to $431,000, $505,000 and $586,000,respectively.

Income taxes paid during Ñscal years 2000, 1999 and 1998 amounted to $6,044,000, $9,092,000 and$13,114,000, respectively.

14. Earnings per share:

The Company's reported net income and the number of shares utilized in the earnings per sharecalculations for the Ñscal years ending July 31, 2000, 1999 and 1998 as follows:

2000 1999 1998

Net Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $14,108,000 $19,513,000 $23,888,000

Weighted average number of common sharesoutstanding Ì BasicÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,817,129 12,683,326 12,614,303

EÅect of dilutive securities:

Stock options ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66,000 108,000 179,000

Weighted average number of common sharesoutstanding Ì DilutedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,883,063 12,790,836 12,793,027

Earnings per common share:

Basic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1.10 $1.54 $1.89

Diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.10 1.53 1.87

15. Segment information:

The Company's operations are primarily within a single segment within the electronics industry (MedicalInstrumentation Technology Products). These operations encompass the design, manufacture and sale of hightechnology, high-performance, high precision data acquisition, conversion (analog/digital) and signal process-ing instruments and systems to customers that manufacture products for medical and industrial use. The othersegment represents the Company's hotel operation, interest and dividend income and other Company'soperations which do not meet the materiality requirements of the statement and thus are not required to beseparately disclosed. The accounting policies of the segments are the same as those described in the summary

42

ANALOGIC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)

of signiÑcant accounting policies. The table below presents information about the Company's reportablesegments:

Year Ended July 31,

2000 1999 1998

Revenues:

Medical instrumentation technologyproductsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $266,823,000 $250,333,000 $263,817,000

Corporate and otherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,796,000 29,361,000 30,655,000

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $297,619,000 $279,694,000 $294,472,000

Income before income taxes and minorityinterest:

Medical instrumentation technologyproductsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 15,823,000 $ 19,674,000 $ 29,328,000

Corporate and otherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,330,000 5,660,000 7,649,000

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 21,153,000 $ 25,334,000 $ 36,977,000

IdentiÑable Assets:

Medical instrumentation technologyproductsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $215,009,000 $191,700,000 $184,579,000

Corporate and otherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 120,567,000 123,313,000 118,378,000

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $335,576,000 $315,013,000 $302,957,000

16. Foreign operations:

Financial information relating to the Company's foreign and domestic operations for Ñscal years 2000,1999 and 1998 are as follows:

Foreign Domestic Total

FY2000

Revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $30,978,000 $266,641,000 $297,619,000

Income from operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,807,000 20,681,000 22,488,000

IdentiÑable assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,614,000 307,962,000 335,576,000

FY1999

Revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,552,000 255,142,000 279,694,000

Income (Loss) from operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,186,000) 31,177,000 29,991,000

IdentiÑable assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,533,000 284,480,000 315,013,000

FY1998

Revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,192,000 264,280,000 294,472,000

Income from operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,697,000 36,299,000 39,996,000

IdentiÑable assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25,733,000 277,224,000 302,957,000

43

ANALOGIC CORPORATION AND SUBSIDIARIES

SCHEDULE II Ì VALUATION AND QUALIFYING ACCOUNTS

Column A Column B Column C Column D Column E Column F

Charged to AdditionsBalance at ProÑt and Charged Deductions BalanceBeginning Loss or To other From At end

Description Of Period income accounts reserves Recoveries Of period

Year ended July 31, 2000

Allowance for doubtfulaccounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,123,000 $ 183,000 $ (296,000) $1,010,000

Year ended July 31, 1999

Allowance for doubtfulaccounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,643,000 $ 367,000 $(1,887,000) $1,123,000

Year ended July 31, 1998

Allowance for doubtfulaccounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,370,000 $1,329,000 $ (56,000) $2,643,000

Deferred tax valuationallowanceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,592,000 (1,592,000)

44

INDEX TO EXHIBITS

Title Incorporated by Reference to

3.1 Restated Articles of Organization as amended Exhibit 3.1 to the Company's Annual ReportMarch 15, 1988 on Form 10-K for the Ñscal year ended

July 31, 1988

3.2 By-laws, as amended January 27, 1988 Exhibit 3.2 to the Company's Annual Reporton Form 10-K for the Ñscal year endedJuly 31, 1988

10.1 Lease dated March 5, 1976 from Bernard M. Exhibit 6(e) to the Company's RegistrationGordon to Analogic Statement on Form S-14 (File No. 2-61959)

10.2 Amendment of Lease dated May 1, 1977 Exhibit to the Company's Report on Form 8-Kbetween Bernard M. Gordon and Analogic May 1, 1977

10.3 Lease dated January 16, 1976 from Exhibit to the Company's Annual Report onBernard M. Gordon to Data Precision Form 10-K for the Ñscal year ended July 31,Corporation and related Assignment of Lease 1977dated October 31, 1979 from Data PrecisionCorporation to Analogic

10.4 (a)Lease dated October 31, 1977 from Exhibit 6(d) to the Company's RegistrationAudubon Realty, Ltd to Data Precision Statement on Form S-14 (File No. 2-61959)Corporation and related letter agreement datedJanuary 18, 1978

(b)Amendment of Lease dated July 19, 1979 Exhibit I to the Company's Annual Report onBetween Audubon Realty, Ltd and Analogic Form 10-K for the Ñscal year ended July 31,

1982

(c)Third Amendment of Lease dated Exhibit to the Company's Annual Report onAugust 2, 1982 Form 10-K for the Ñscal year ended July 31,

1982

(d)Fourth Amendment of Lease dated Exhibit 19.1 to Quarterly Report onDecember 31, 1982 Form 10-Q for the three months ended

January 31, 1983

10.5 (a)Lease dated March 16, 1981 from Exhibit II to the Company's Quarterly ReportAudubon Realty Ltd to Analogic on Form 10-Q for the three months ended

April 30, 1981

(b)Amendment of Lease dated October 31, Exhibit to the Company's Annual Report on1984 Form 10-K for the Ñscal year ended July 31,

1985

10.6 Land Disposition Agreement by and between Exhibit to the Company's Annual Report onCity of Peabody Community Development Form 10-K for the Ñscal year ended July 31,Authority and Analogic Corporation 1981

10.7 Loan Agreement among the City of Peabody, Exhibit to the Company's Annual Report onits Community Development Authority, and Form 10-K for the Ñscal year ended July 31,Analogic Corporation 1981

10.8 Amendments to Urban Development Action Exhibit 10.13 to the Company's Annual ReportGrant Agreement dated August 28, 1986 and on Form 10-K for the Ñscal year endedSeptember 30, 1986. July 31, 1986

10.9 Promissory Note of Analogic payable to Exhibit to the Company's Annual Report onPeabody Community Development Authority Form 10-K for the Ñscal year ended July 31,

1981

10.10 (a)Stockholder Agreement as of July 9, 1986 Exhibit to the Company's Report on Form 8-Kby and among Siemens AG, SCC, and dated July 31, 1986Analogic including the following exhibitsthereto

(b)Development Agreement dated as ofJuly 28, 1986 between Siemens AG andMedical Electronics Laboratories, Inc.

45

Title Incorporated by Reference to

(c)Manufacturing Agreement dated as ofJuly 28, 1986 between Analogic and MedicalElectronics Laboratories, Inc.

(d)License Agreement dated as of July 28,1986 between Analogic and MedicalElectronics Laboratories, Inc.

(e)License Agreement I dated as of July 28, Exhibits to the Company's Report on1986 between Siemens AG and Medical Form 8-K Dated July 31, 1986Electronics Laboratories, Inc.

(f)License Agreement II dated as of July 28,1986 between Siemens AG and MedicalElectronics Laboratories, Inc.

(g)Sublease dated as of July 28, 1986 betweenAnalogic as sublessor and Medical ElectronicsLaboratories, Inc. as sublessee

10.11 Stock Purchase Agreement as of March 11, By Exhibit 10.11 to the Company's Annual Reportand among Siemens AG, SCC, SMS, MEL on Form 10-K for Ñscal year ended July 31,and Analogic 1988

10.12 (a)Anamass Partnership Agreement dated As Exhibit 10.12(a) to the Company's Annualof July 5, 1988 between Ana/dvature Report on Form 10-K for Ñscal year endedCorporation and Massapea, Inc. July 31, 1988

(b)Ground Lease Agreement dated July 5, Exhibit 10.12(b) to the Company's Annual1988 between Analogic and Anamass Report on Form 10-K for Ñscal year endedPartnership July 31, 1988

(c)Equity Infusion Agreement Exhibit 10.12(c) to the Quarterly Report onForm 10-Q for the three months endedJanuary 31, 1991

(d)Resolution Agreement dated July 31, 1991 Exhibit 10.12(d) to the Company's Annualand ratiÑed on August 8, 1991 Report on Form 10-K for Ñscal year ended

July 31, 1991

10.13 Key Employee Stock Option Plan dated Exhibit 10.7 to the Company's Annual ReportAugust 8, 1980, as amended and restated on Form 10-K for the Ñscal year endedDecember 4, 1981, and further amended on July 31, 1987October 9, 1984 and January 28, 1987

10.14 Key Employee Stock Option Plan dated Exhibit 10.8 to the Company's Annual ReportAugust 8, 1980, as amended and restated on Form 10-K for the Ñscal year endedDecember 4, 1981, and further amended on July 31, 1987October 9, 1984 and January 28, 1987

10.15 (a)Analogic Corporation ProÑt Sharing Plan Exhibit 6(c) to the Company's RegistrationDated July 26, 1977 Statement on Form S-14 (File No. 2-61959)

(b)Amendments 2,3,4 and 5 to said ProÑt Exhibit 10.10(b) to the Company's AnnualSharing Plan Report on Form 10-K for the Ñscal year ended

July 31, 1980

(c)Restated Analogic Corporation ProÑt Exhibit 10.9(c) to the Company's AnnualSharing Plan dated July 31, 1985 and Report on Form 10-K for the year endedAmendment No. 1 thereto dated August 20, July 31, 19851985

10.16 Key Employee Stock Bonus Plan dated March Exhibit A to deÑnitive proxy statement for the14, 1983, as amended on January 27, 1988 Company's Special Meeting in lieu of Annual

Meeting of Stockholders held January 25, 1984(File No. 33-27372)

10.17 Key Employee Incentive Stock Option Plan Exhibit 10.15 to the Company's Annual Reportdated March 14, 1983, as amended and on Form 10-K for the Ñscal year endedRestated on January 28, 1987 July 31, 1987 (File No. 2-95091)

10.18 1985 Non-QualiÑed Stock Option Plan Dated Exhibit 10.19 to the Company's Annual ReportMay 13, 1985 on Form 10-K for the Ñscal year ended

July 31, 1985 (File No. 33-6835)

46

Title Incorporated by Reference to

10.19 (a) Employee QualiÑed Stock Purchase Plan Exhibit G to the Company's deÑnitive proxydated June 10, 1986 Statement dated December 9, 1985 for the

Company's Special Meeting in lieu of AnnualMeeting of Stockholders held January 22, 1986(File No. 33-5913)

(b) Said Employee Stock Purchase Plan (as Exhibit A to the company's deÑnitive Proxyamended on October 9, 1997) Statement dated December 1, 1997 for the

Company's Annual Meeting to ShareholdersHeld January 23, 1998.

10.20 Proposed 1988 Non-QualiÑed Stock Option Exhibit 10.20 to the Company's Annual ReportPlan for Non-Employee Directors on Form 10-K for the Ñscal year ended

July 31, 1988 (File No. 33,273372)

10.21 Form of IndemniÑcation Contract Exhibit 10.19 to the Company's Annual Reporton Form 10-K for the Ñscal year endedJuly 31, 1987

10.22 Agreement and Plan of Merger between SKY Exhibit 10.22 to the Company's Annual ReportCOMPUTERS, Inc., and Analogic on Form 10-K for the Ñscal year endedCorporation July 31, 1992

10.23 (a) Agreement between B-K Medical Holding Exhibits to the Company's Report onA/S and Analogic Corporation dated Form 8-K dated December 18, 1992October 20, 1992

(b) Addendum dated December 11, 1992 toAgreement between B-K Medical HoldingA/S and Analogic Corporation datedOctober 20, 1992

(c) Shareholders Agreement between B-KMedical Holding A/S and AnalogicCorporation dated December 11, 1992

10.24 Key Employee Incentive Stock Option Plan Exhibit A to the Company's deÑnitive ProxyDated June 11, 1983 Statement dated December 1, 1993 for the

Company's Annual Meeting of Stockholdersheld January 21, 1994 (File No. 33-53381)

10.25 Non-QualiÑed Stock Option Plan for Non- Exhibit A to the Company's deÑnitive ProxyEmployee Directors dated January 31, 1997 Statement dated December 2, 1996 for the

Company's annual meeting of stockholdersheld January 24, 1997

10.26 Key Employee Incentive Stock Option Plan Exhibit A to the Company's deÑnitive ProxyDated June 11, 1998 Statement dated December 1, 1998 for the

Company's Annual Meeting of Stockholdersheld January 22, 1999.

47

EXHIBITS

Title

21. List of Subsidiaries

23. Consent of PricewaterhouseCoopers LLP

27. Financial Data Schedule

48